(Bloomberg Opinion) -- In the tug of war that pits Barclays Plc Chief Executive Officer Jes Staley against activist shareholder Edward Bramson, the bank’s surprise management rejig shows the investor has pulled harder.
In the reorganization announced on Wednesday, Staley created a new position to oversee consumer banking and payments. He also put himself more directly in charge of the securities unit. Out goes the head of the business, Tim Throsby, who the CEO had brought in just two years ago. The business will now be split into three — global banking, global markets and the corporate bank — with the heads of each joining the executive committee, reporting to Staley.
At the heart of his battle with Bramson has been the future of the investment bank. The investor has been arguing for a year that Barclays should reengineer its strategy and shrink the unit, which remains a drag on the company’s returns. After failing to engage successfully with management, he’s now seeking a position on the board.
Staley has staked his reputation on maintaining the division while improving its profitability. He presented the latest management moves as sign of greater CEO accountability.
But look through his upbeat talk on how great he’s been feeling about the market-share gains last year. The changes are an admission that the corporate and investment bank, run by his own appointee, isn’t where it should be.
Staley seems to get this. Return on tangible equity at just over 7 percent in 2018 isn’t where it should be, he said. Cutting layers of management should improve oversight and performance, he added. The announcement on Wednesday saw him acknowledge that improvements are needed in executing the strategy.
That the board has been backing Staley is hardly surprising. He’s only about three years into the plan that saw the bank sell its Africa business and slash dividends. But having decided to stick with trading, his position is more difficult given how fees have shriveled and regulatory costs continue to rise.
Allowing Staley’s strategy more time is the right approach. And though it’s risky, there’s a big windfall if his latest contrarian move winds up as the winning bet.
But now he has a bigger workload, more direct responsibility for the success of the investment bank, and a greater share of the potential blame if things go wrong.
Bramson may not have got his way yet, but he’s certainly got Staley on a tighter leash. As for the CEO, by getting closer to the investment bank, he’s got one fewer card to play.
To contact the editor responsible for this story: Jennifer Ryan at jryan13@bloomberg.net
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Elisa Martinuzzi is a Bloomberg Opinion columnist covering finance. She is a former managing editor for European finance at Bloomberg News.
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