Barclays Names Diamond CEO, Pledges to Retain Universal Model
Robert Diamond, the architect of Barclays Plc’s investment banking expansion, was appointed chief executive officer and pledged to boost the bank’s consumer unit.
Diamond, 59, will become deputy CEO next month before John Varley, 54, steps down at the end of March, the lender said in a statement today. He will move to London from New York and receive as much as 11.48 million pounds ($18 million) in salary and bonuses as CEO.
Chairman Marcus Agius today defended the bank’s universal model, where it acts as both a consumer and an investment bank, as a U.K. government commission considers forcing lenders to separate the businesses. Barclays, the U.K.’s third-biggest bank, is trying to cut the proportion of pretax profit generated by its investment bank to a third, down from two-thirds in the first half of this year.
“There’s absolutely no space between John, Marcus and I on the strategic direction of Barclays,” Diamond told reporters on a conference call. “There’s no change in strategy here.”
Barclays fell 2.7 percent to 314 pence in London, as banking stocks slipped on lingering concern that the sovereign- debt crisis will hold back the global recovery. Barclays recorded the biggest decline in the five-member FTSE 350 Index of U.K. banks.
“The initial reaction to this is likely to be negative because of Diamond’s focus on the investment bank, but it shouldn’t be,” said Simon Maughan, an analyst at MF Global in London. “Barclays has been 70 percent an investment bank for ages. Barclays shouldn’t be ashamed of being a very successful investment bank.”
Massachusetts-born Diamond led Barclays’s 2008 purchase of Lehman Brothers Holdings Inc.’s U.S. operations. He has since embarked on an expansion in Asia, hiring at least eight managing directors in Hong Kong since March from rivals including Goldman Sachs Group Inc. and Morgan Stanley. The unit’s revenue was 11.6 billion pounds last year, up from 5.2 billion pounds in 2008.
He also led the talks last year to sell Barclays Global Investors unit to BlackRock Inc. for $15.2 billion. Diamond received a 26.8 million-pound gain on the sale his shares in BGI, the bank said in March.
“He’s been the de facto head of Barclays for many years,” said Peter Swan, professor of finance at the Australian School of Business in Sydney, part of the University of New South Wales. “It makes sense to give the person who effectively controls the bank the formal title.”
Diamond began his career as a lecturer at the University of Connecticut in 1976 and has also held roles at roles at Credit Suisse First Boston in Tokyo and New York and Morgan Stanley. Diamond was beaten to the CEO job by Varley in 2003 and became president of the bank in 2005.
“The board could not risk losing Diamond by overlooking him again,” said Chris Wheeler, an analyst at Mediobanca SpA in London. “Despite his apparent support of the universal banking model, Diamond will be considering whether Barclays will obtain a higher rating as a pure investment/corporate banking/wealth manager.”
Diamond will receive 1.35 million pounds in salary and an annual incentive award worth 250 percent of salary. He is also eligible for a long-term performance award of as much as 500 percent of base salary in 2011, the company said. He received a salary of 250,000 pounds last year, Deputy Chairman Richard Broadbent said in April.
In April, U.K. Business Secretary Peter Mandelson described Diamond as the “unacceptable face” of banking after earning what he said was 63 million pounds, the Times of London reported. Most comment on Diamond’s pay “is wrong,” the bank said later that month.
Both Varley and Diamond declined bonuses for a second year in 2009. Bank spokesman Alistair Smith declined to make Diamond or Varley available for interview.
The appointment showed “Barclays’ faith in the universal banking model bringing as it does Bob Diamond’s investment banking expertise into the bank’s retail operation,” the British Bankers’ Association said in a statement today.
The bank plans to name Green’s replacement by the end of this year, London-based HSBC said in a statement today. Green will take up his government job in January.