Barclays – time to hear the case for the defence
Barclays got a lot of things wrong – Libor rigging, along with many others, the mis-selling of interest rate swaps to small businesses, along with many others, and payment protection insurance, along with many others.
Even the bank’s ability to avoid the state bailout in 2008 via an injection of cash from Qatar is now being questioned. There could be more mud to come, more mud to be flung and more mud that will stick. The bank’s enemies will happily partake.
The problem with this view of Barclays is that our perspective has been warped out of all recognition. In focusing on the negatives, we are not allowing ourselves any opportunity to understand what the bank does well. Anyone who dares posit that in fact having a bank that – on the other side of the Atlantic – is a major player in investment banking could be seen as a good thing is bellowed down as a heretic.
At its simplest, Barclays is not all bad and neither is Mr Diamond. It is worth remembering, for instance, the Euromoney Awards for Excellence 2011, a time when Mr Diamond was still in charge.
The citation read: “Barclays Capital has achieved an enormous amount. It is now clearly one of the top half-dozen investment banks in the world, when you combine both markets and banking.
“It’s the only foreign bank ever to become a top five player in the US, and in many markets there it ranks much higher than that. Its FICC [fixed income] business remains a global leader, and its M&A and equity businesses are showing great momentum. In effect, this is a business that has crunched five years of growth into the space of just a couple of years.”
In a note on Barclays last week, Investec Securities said that “much of the heavy lifting” on cutting BarCap’s costs and making it a better business for clients and shareholders “had been done under Bob Diamond’s watch”.
The report pointed out that since the end of 2012 and in the wake of the bank’s £290m Libor settlement Barclays “has, by some margin, been the top-performing UK bank, and since the low point of July 25, 2012, an investment in Barclays has generated a 99pc return in a little over six months”.
Such returns, of course, help to pay everyone’s pensions.
On Tuesday, Mr Jenkins will get his chance to outline where the bank is going and it is good to see from his article in The Sunday Telegraph that dancing on Mr Diamond’s grave is not central to the bank’s strategy.
“So does the changed political, regulatory and economic climate mean that banks should accept that they will never regain the trust they have lost and should limit their ambitions by adopting a strategy of consolidation and retrenchment? Absolutely not,” Mr Jenkins says.
“Barclays will be a universal bank that combines excellent retail banking operations with a high-quality investment bank and one which retains a strong international presence in growing markets. That combination is not just what Barclays needs, it is what our customers demand and what the British economy deserves.”
This has to be the right approach. It would be too easy to signal that the investment bank – Bob’s baby – does not retain the priority it once did and that Barclays in the future is considering a path which takes it more towards Lloyds Banking Group or the Royal Bank of Scotland than towards Goldman Sachs and battling the titans of Wall Street.
It would be easy and wrong. The fact that Rich Ricci, the head of Barclays investment bank and formerly a loyal Diamond lieutenant, is staying gives some reason for hope.
Mr Jenkins knows he has a job to do signalling a change of culture at the bank. He also has a job to do signalling that he is running a business that has much going for it. It would be as good to hear as much about the latter on Tuesday as we hear about the problems that Barclays is working hard to overcome.
Any ITV shareholders hoping that the arrival of Liberty Global on the UK’s shores might presage a bid for the commercial broadcaster have probably got a long wait ahead of them.
One of the rather more fanciful claims of last week was that John Malone, Liberty Global’s chairman, might be eyeing a broadcasting business to go alongside Virgin Media, which he bought last week for £15bn. After all, Comcast, Liberty’s great US pay-TV rival, bought NBC Universal from General Electric.
Mr Malone’s strategy, though, is markedly different. Liberty Global is in the distribution business, gaining content via wholesaling deals with content and rights owners such as BSkyB and, increasingly, BT.
Liberty likes mature, stable Western economies where affluent customers are willing to pay good money to see Manchester United play or the latest series of Homeland. The UK joins Belgium, Germany, the Netherlands and Switzerland in the Liberty stable.
After many years of investment, Virgin Media is now in the cash-generation business, the sweet spot for investors and a position enjoyed by Jeremy Darroch, the chief executive of BSkyB. Its billions of pounds of investment also mean that Virgin Media can defer corporation tax payments well into the future.
Mr Malone is not into conflict with his rivals, a position too often taken by the Virgin Media of old, which seemed to be on an almost constant war footing with BSkyB. Virgin Media’s outgoing chief executive, Neil Berkett, whom Liberty wanted to keep, has carefully eased relations with Rupert Murdoch’s UK television arm. Mr Malone has no desire to upset that apple cart.