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Bramson Pickle: Rogue Investor Lights a Fire Under Staley as Investment Budget is Cut at Barclays

By Matthew Dove (Senior Editor)

Operating expenses at Barclays’ investment unit have dropped to their lowest level since 2015, falling to £1.6bn in the first quarter.

Barclays CEO, Jes Staley, warns bonuses will be cut for its investment bankers and traders if profitability doesn’t improve.

Staley added: “What you see in the first quarter is Barclays using this discretion around variable compensation to manage our costs and deliver expected profitability,”

This comes in light of rogue activist investor Edward Bramson (the third largest shareholder at Barclays, with a 5.5% stake) continued efforts to get a seat on the Barclays board and to have a greater influence over the bank’s strategy. Bramson wants the investment bank to be scaled back, whereas Staley, wants to protect the division.

Jes Staley comments: “This is the sixth quarter in a row we’ve gained market share against US banks,”

“So to those that argue that we’re structurally disadvantaged versus US banks: if that structural disadvantage leads to market share growth, then maybe we should keep it.”

In a letter to shareholders issued through his outfit Sherborne Investors Management, Bramson laid out his view of Staley’s approach;

“The board has not offered any credible reason to believe persisting in this strategy will produce better results for shareholders in the future than it has since its inception, as even the modest 2018 return on group tangible equity of 8.5% was achieved only because of non-recurring items that, by our estimate, added more than GBP700 million to profit before tax for the year. We are also concerned that the Corporate & Investment Bank’s long-term competitive position remains strategically weak.”

“We are also concerned that the Corporate & Investment Bank’s long-term competitive position remains strategically weak.”

The tête-à-tête between Bramson and Staley has played out against a backdrop of modernisation at the giant of Cheapside. There are influential voices at Barclays who feel that the future of the bank lies as much in innovation as it does in the bread and butter of investment banking. When we asked COO Gus Macfarlane what his priorities are, he answered;

“Better understanding of what our customers want, need and expect from us. We balance this with our plan to continue to focus on generating growth for the company through delivering greater value for the money we spend, supporting the business entities and bringing new opportunities into the bank. Our aim is to embed a culture of innovation across all areas of the bank.”

It was an opinion echoed by Ruchir Rodrigues at December’s Fintech Connect who proclaimed proudly that Barclays is, “the UK’s biggest fintech.” He also emphasised the bank’s renewed focus on cutting-edge customer service and the achievement of market dominance through digital products, citing the following impressive stats as evidence thereof;

  • 90% of all the bank’s transactions are now digital
  • It has 10.6 million active digital users
  • As well as 5 million digital-only customers

For Staley and Co. old habits may be proving hard to kick but it seems that more progressive minds are slowly coming to the fore and, in the form of Edward Bramson, they might have found their talisman.

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