London Briefing: Barclays set to turn clock back in top post

When Bob Diamond resigned from Barclays in the wake of the Libor-rigging scandal three years ago, a deep gloom descended over the group's investment banking arm, as traders mourned the loss of their brash risk-taker in chief.

Their worst fears were realised when, a couple of months later, Oxford-educated Antony Jenkins was plucked from the retail side of the bank to replace Diamond as chief executive.

Dubbed “St Antony”, he pledged to transform the group’s toxic culture and swiftly set about reining in the “casino banking” operations, slashing bonuses and axing thousands of jobs in the process.

Sacked

That worked out badly, both for Barclays and Jenkins, who was unceremoniously sacked earlier this year by new chairman John McFarlane.

Now the champagne is no doubt on ice at the investment bank as Barclays prepares to turn the clock back and bring in another American investment banker as chief executive.

James Staley, known as Jes, is a Wall Street veteran, having spent more than 30 years at JP Morgan Chase. He had been seen as a possible successor to Jamie Dimon but left to join the hedge fund industry a couple of years ago.

Staley has been here before – he was seriously considered for the Barclays job after Diamond was forced out in 2012, but the bank clearly felt it would have been too controversial a choice at the time to replace one American investment banker with another, particularly in the wake of the Libor scandal.

Three years later, however, with the “safe” candidate Jenkins having failed, Barclays seems ready to take the risk. The bank declined to comment on his appointment yesterday, other than to say the process of recruiting a new chief executive “has not yet concluded” but the news looks to have been strategically leaked to test the political and market reaction.

Muted reaction

The market reaction was muted, with Barclays shares sliding around 3 per cent, as analysts tried to assess the implications of the appointment, which will need approval from financial regulators.

Having an investment banker back in the driving seat would certainly cast doubt on the bank’s strategy of curbing the once-powerful investment banking arm.

There are a number of similarities between James E Staley and Robert E Diamond: after long careers in investment banking, both have acquired the usual trappings of wealth; in Staley's case, a custom-made 90ft yacht named Bequia, after the Caribbean island on which he spent his honeymoon. And, like Diamond, Staley supports the Boston Red Sox baseball team.

There are differences too: Staley is a Democrat while Diamond is a Republican supporter. Staley is said to be softer-spoken, confident but not brash, and with a straightforward management style.

He is known for being big on “financial discipline”.

Assuming his appointment is confirmed, Staley will need all his management skills to steer Barclays through its next phase.

Against the background of tighter regulation and much closer public scrutiny, the banking world now is very different to the one in which Diamond wielded his power before the financial crisis.

There'll be some familiar faces at Barclays – finance director Tushar Morzaria also worked at JP Morgan and, until the news on Staley emerged, had been seen as frontrunner for the top job himself.

David Buik from broker Panmure Gordon hailed Staley's impending arrival, saying the Barclays chairman had clearly worked out that "without a good knowledge of investment banking they'll never be able to deliver shareholder value".

He added: “I don’t think the government will be happy about this, but John McFarlane won’t care a bit.”

Bad old ways

James Chappell

at Berenberg said that while the appointment would remove one uncertainty surrounding the bank, the choice of chief executive raised other questions over its outlook, amid fears it may be “returning to its bad old ways”.

If Staley’s appointment is an indication that Barclays intends to bulk up in investment banking once again, the bank would need more capital, something that would also concern investors.

But there are other options, such as hiving off the investment bank and relocating it to Wall Street.

That's a strategy advocated by banking analyst Sandy Chen at Cenkos. "Of course, it would have to be cleaned up and maybe recapitalised along the way, but this is what those investment bankers are good at," he said.

Such a strategy would please regulators on both sides of the pond. Investors would be more than happy, too, if the new Barclays chief executive could at last unlock some shareholder value. Fiona Walsh is business editor of theguardian.com