Barclays Chairman Says People `Jumped to Conclusions' on CEOby and
Says Staley is `client guy,' `not hiring an investment banker'
McFarlane says timing of CEO hire isn't in hands of the bank
Barclays Plc Chairman John McFarlane said some observers of the lender have “jumped to conclusions” about the firm’s strategy if former senior JPMorgan Chase & Co. banker Jes Staley becomes chief executive officer.
Britain’s second-largest bank is close to hiring Staley, a former head of JPMorgan’s investment bank, a person with knowledge of the matter has said.
“If we hire him, we’re not hiring an investment banker,” McFarlane said on the sidelines of a conference in London on Thursday. “He’s a client guy” who “started out as a commercial banker, like me. We might have hired someone who’s run an investment bank; well, I’ve run an investment bank. People have jumped to conclusions.”
Barclays shares are little changed since Staley’s candidacy for the CEO job was first reported on Oct. 12 as investors consider whether such a hire would mean a reversal in strategy for the investment bank, a business that McFarlane has pledged to shrink. The chairman is seeking a CEO who can boost returns at the securities unit, while navigating rules and investigations that have eroded the firm’s profits.
In July, McFarlane ousted CEO Antony Jenkins, a former retail banker, after growing frustrated with the slow pace of restructuring. Jenkins, named CEO after Staley was passed over in the wake of the Libor scandal in 2012, succeeded Robert Diamond, the architect of Barclays’s investment-bank expansion and, like Staley, American-born.
McFarlane said the timing for the announcement of the new CEO is out of the bank’s hands. Staley was interviewed by U.K. regulators on Tuesday in what was the final hurdle to his appointment, according to two people with knowledge of the matter.
Staley wasn’t a trader at JPMorgan and only managed the investment bank, which focused on clients, McFarlane said. The chairman repeated that he wants to slim down the investment bank, aiming to improve returns amid higher capital requirements and sluggish economic growth in Europe.
By contrast, the U.S. unit is “firing on all cylinders,” he said.
McFarlane said the securities unit has been a drag on Barclays and curtailed investment in more profitable businesses, such as credit cards and Africa, because of the amount of capital it consumes. In 2014 the securities division reported a return on equity, a measure of profitability, of 2.7 percent, down from 8.2 percent the previous year and short of the bank’s 12 percent group target.
“We’ve been on a journey for quite a while in trying to have a capital-lighter model of investment banking, and that’s not going to change,” McFarlane said. “You have to decide what kind of investment bank you are and stick to it. UBS Group AG is “a great example,” and has been successful after its restructuring, he said.
The stock rose 1 percent to 253.1 pence at 11:26 a.m. in London, extending its gain this year to 4 percent, the most among Britain’s five-biggest banks.
In the past “most of the returns at investment banks went to employees and not to shareholders and I think that game is over,” McFarlane said at the British Bankers Association’s annual conference. Barclays shrunk its 2014 bonus pool by more than 17 percent to less than 2 billion pounds, a person with knowledge of its compensation strategy said in February.
However, the chairman said Barclays is not going to lead the charge by clamping down severely on compensation, because it would leave the bank at a competitive disadvantage if peers did not follow.
“In order to motivate them we have to pay them,” he said. If Barclays cut salaries and bonuses, “all that happens is you lose your best people,” McFarlane said.
McFarlane said he’s “trying to create a new future for a company that is really quite old, with a long heritage.”
“In my corridor, there are paintings of all the chairmen, going back to the mid-1700’s, and of course the thought that I have walking through there is that I don’t want to be the last painting on the wall,” he said.