Active Stocks
Thu Mar 28 2024 15:59:33
  1. Tata Steel share price
  2. 155.90 2.00%
  1. ICICI Bank share price
  2. 1,095.75 1.08%
  1. HDFC Bank share price
  2. 1,448.20 0.52%
  1. ITC share price
  2. 428.55 0.13%
  1. Power Grid Corporation Of India share price
  2. 277.05 2.21%
Business News/ Companies / News/  Barclays’s new CEO faces old challenges
BackBack

Barclays’s new CEO faces old challenges

wsj

Jes Staley’s successor will need to solve the long-running conundrum of generating decent returns at a European bank

REUTERSPremium
REUTERS

The circumstances surrounding Jes Staley’s departure from Barclays are certainly not the ones he or his employer would have chosen, but he has finished the job he was hired to do.

On Monday, the British bank said its chief executive would step down to contest preliminary findings by U.K. regulators about how he characterized his relationship with convicted sex offender and financier Jeffrey Epstein. C.S. Venkatakrishnan will now lead the lender. The JPMorgan Chase veteran joined Barclays in 2016 and was earmarked as the board’s “preferred candidate" over a year ago, the bank said. Shares in the bank fell nearly 2% in morning trading.

Mr. Staley took over in 2015 and restructured Barclays into a more focused company including a full-service U.K. lender, a U.S. credit-card unit and an investment bank centered on London and New York. It still wasn’t focused enough for activist investor Edward Bramson’s Sherborne Investors, but the strategy has been vindicated during the pandemic: Strong investment banking returns have compensated for lower profits from the lending divisions as businesses and households saved cash and paid down debts during the crisis. Mr. Bramson sold his stake earlier this year.

With a tenure approaching six years, Mr. Staley was one of the longer-standing European banking CEOs. While the timing was a surprise, his departure wasn’t unexpected and the bank’s board has had plenty of time to prepare. The investigation was launched in February 2020 and regulators were expected to take a tough line following an earlier run-in over Mr. Staley’s attempts to uncover the identity of a whistleblower.

Although Mr. Staley found a form for Barclays that seemed to work, he wasn’t able to buck the European trend of low bank returns and stock-market valuations. At the end of his tenure, the stock is down 13%, for a minus 2% total return, in line with local rivals. The shares are trading at 0.65 times tangible book value, trailing the European average of 0.79—let alone the much more highly rated U.S. peers with which Barclays tries to compete.

Banking in the region remains a relatively moribund business and unsecured lending hasn’t yet bounced back. Mortgage lending has rebounded and British and U.S. consumers are shopping again, but they aren’t building credit-card balances. That will be a problem for Barclays if it persists once global markets normalize. There is still time, as the deal-making frenzy continues to boost investment-banking revenues and interest-rate rises are expected soon in the U.K. and U.S.

Mr. Venkatakrishnan was promoted to head of global markets from group chief risk officer in October 2020 after he was internally identified as the heir apparent. It will be his job to sketch out a solution to the long-running puzzle of generating healthy returns at a European bank. Investors will be wise to keep their hopes in check.

This story has been published from a wire agency feed without modifications to the text

 

 

Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!

Next Story footLogo
Recommended For You
Switch to the Mint app for fast and personalized news - Get App