Barclays’ investment bankers have fallen out of the Premier League
Cast your mind back a decade, to the spring of 2009. The UK was four months into its first recession in 18 years, the banking crisis had reached its zenith – or perhaps its nadir – and Manchester United were on the verge of winning the Premier League title.
The fortunes of the British economy and the Red Devils have certainly reversed since them, the former improving modestly and the latter … well, not so much.
But while the banking sector is no longer in crisis, it isn’t exactly in fine fettle. Deutsche Bank is more or less a “zombie bank”, still struggling to shake off the after-effects of the crisis 10 years later. Italy’s financial sector is in a parlous state, reawakening fears of national and regional contagion.
Critics say it has wasted resources, sucking up too much cash while offering little financial return
Back in those heady days of 2009, investment bankers still ruled the roost. Bob Diamond, infamously described by Lord Mandelson as the “unacceptable face of banking”, was arguably the most powerful figure at Barclays, having presided over the meteoric rise of its investment banking arm, BarCap.
Such was his status that, despite spreading global distaste for bonus-happy traders – who were seen as having plunged the world into recession – he was already being lined up as group chief executive.
But what of the house that Bob built now? The division that was once Barclays’s pride and joy has become the embarrassing relative.
The division is seen as having underperformed – a point that group chief executive Jes Staley conceded last month as he defenestrated the unit’s boss, Tim Throsby. Critics say it has wasted resources, sucking up too much cash while offering little financial return. The unit’s pre-tax profits sank 29% in the first quarter, according to figures released last week. That will give its critic-in-chief, activist investor Edward Bramson, all the ammunition he needs to turn the screw on the bank’s leadership at Thursday’s annual meeting. The corporate raider holds a 5.5% stake via his Sherborne Investors vehicle, making him one of its largest shareholders. He is rattling his sabre, asking fellow investors to vote him onto the bank’s board.
Should he succeed in becoming the cuckoo in Barclays’s nest, he will push for the investment banking unit to be hacked back to boost the group’s share price.
Barclays isn’t the only investment bank having a tough time. UBS said last week that its investment banking profits plunged 64%, while Deutsche’s trading arm, which appears to be in a perpetual state of decline, suffered its second loss-making quarter in a row.