Barclays Raider’s Strategy Is Wrong, Berenberg and Citigroup Say
(Bloomberg) -- Analysts at Citigroup Inc. and Berenberg poured cold water on Edward Bramson’s plans to obtain a seat on Barclays Plc’s board and shift its strategy away from the investment bank.
“We believe Mr Bramson will ultimately prove unsuccessful in his objective to obtain a board seat,” said analysts at Citigroup including Andrew Coombs. He “would need a shareholder majority, which we think would be difficult to obtain, as well as U.K. regulatory approval, which could be harder still to obtain,” they said.
Bramson, who emerged as one of the biggest Barclays shareholders last spring, said in a letter to his investors seen by Bloomberg News on Monday that he had lost faith in his dealings with the British lender. He plans to go directly to shareholders for approval for board changes after the bank rebuffed his request for a seat at the top.
The activist is keen to make reductions at the corporate and investment bank, which has reported a lower return on equity than other units. However, Citigroup warned against the strategy as costs may outpace potential revenues. “We have been here before,” analysts said. Former Chief Executive Officer Antony Jenkins “tried to shrink the CIB and found that revenue attrition outpaced cost saves,” they added, predicting that Bramson would ultimately exit his position from Barclays.
Berenberg is also “dubious” of the raider’s ability to gain a board seat. “While plans such as those being proposed by Bramson have appeared attractive in the past, including to us, such plans now seem poorly-timed given improving returns and momentum in the investment bank,” said Peter Richardson, analyst at Berenberg in London.
Bramson has indicated that could seek the board changes at the annual general meeting in May or may call a separate session for shareholders. If Bramson asks for shareholder approval at the AGM under the form of an ordinary resolution, he will require a simple majority to be passed, according to the U.K. law. Despite these hurdles and skepticism in the sell-side, some investors believe the raider has a chance to succeed.
“He must have some confidence” he can get a seat in the board, Eric Moore, a fund manager at Miton Group in London who owns shares of U.K. banks including Barclays, said in an interview. “I would not bet against Mr Bramson getting there in the end.”
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