Barclays’s CEO Hunt Leads to Another American Banker, Jes Staley
October 14, 2015 by Noah Buhayar
Barclays Plc Chairman John McFarlane’s three-month hunt for a chief executive officer with a new set of skills has led to a familiar form of talent: an American investment banker.
Jes Staley, 58, who spent more than three decades at JPMorgan Chase & Co., is now the leading candidate for London-based Barclays’s top job, a person with direct knowledge of the matter said Monday. The lender’s last American CEO, Robert Diamond, resigned just three years ago amid public and government pressure after regulatory fines. His replacement, British retail banker Antony Jenkins, was ousted in July.
Jes Staley Photographer: Scott Eells/Bloomberg
McFarlane, 68, frustrated by what he called a “cumbersome and bureaucratic” bank under Jenkins, has been seeking a CEO who can boost revenue while navigating tougher rules and regulatory fines that have eroded earnings. While the chairman hasn’t indicated whether he plans to continue shrinking the securities unit — once among the world’s largest under Diamond, a former Wall Street banker — he told staff in a memo last month that he will have to make some “tough calls” in the coming weeks to shore up returns.
“The reality is that Barclays has a large investment bank,” which “will remain an important part of the group,” David Moss, who helps oversee about $254 billion of assets at BMO Global Asset Management in London including Barclays shares. “It’s important that whomever the new CEO is understands the investment bank. My understanding is that Jes Staley does, but that he also has a wider banking experience,” making him a “strong combination” with McFarlane.
Barclays said in a statement on Tuesday that “the process of appointing a new group chief executive officer has not yet concluded” and that it “will provide a further update once that is complete.”
The shares dropped as much as 3.5 percent and were down 2.3 percent at 250.75 pence at 3:01 p.m. in London, paring their gain this year to about 3 percent. The Bloomberg Europe Banks and Financial Services Index has slipped 0.2 percent in that period.
34-Year Career
Staley rose from his post as an investment banker in Brazil to run JPMorgan’s asset-management and investment-bank units. At the peak of his 34-year career at the company, he was seen as a candidate to succeed Jamie Dimon as CEO.
If hired by Barclays, he would become the second former head of JPMorgan’s investment bank to take over a British lender this year. Bill Winters, who led the unit before Staley, became CEO of Standard Chartered Plc in June.
As part of a series of executive changes in 2012, Staley was stripped of all day-to-day management duties at JPMorgan and passed over for a promotion. Around that time, he was a finalist to take the top job at Barclays, according to reports in the Wall Street Journal and CNBC. Months later, he quit to become a managing partner at hedge-fund firm BlueMountain Capital Management. He also sits on the board of UBS Group AG.
Past Errors
In picking him now, Barclays has acknowledged its earlier error, said Glenn Dubin, co-founder of investment firm Highbridge Capital Management, which Staley pushed to buy when he was at JPMorgan.
“There are probably only half a dozen people in the world that are wired to be CEO of big money-center institutions,” Dubin said. “Jes is one of those people.”
Barclays has told regulators that Staley is the frontrunner for the CEO post, and if approved, the appointment could be announced within two weeks, said the person with knowledge of the situation, who asked not to be identified because the decision isn’t final. Kerrie Cohen, a Barclays spokeswoman, declined to comment, as did a spokesman for BlueMountain.
At Barclays, Staley would join McFarlane, whose approach to cost cuts at Australia & New Zealand Banking Group Ltd. and British insurer Aviva Plc earned him the unwanted nickname “Mack the Knife.” In a memo to staff last month, the Barclays chairman said that while investors had been “incredibly patient” with the bank, they “won’t be for long.”
Barclays, which has more than 130,000 employees across some 50 countries, will focus on its core strengths and take measures to accelerate earnings growth to help boost dividends, he wrote at the time.
Boston Backgrounds
Staley was born in Boston and moved around the country as a child until his family settled outside Philadelphia, where his father was an executive at a small chemical company, according to a 2010 profile in Fortune magazine. He earned his bachelor’s degree in economics at Bowdoin College and then began a banking career at Morgan Guaranty Trust Co. of New York in 1979.
Diamond, a second generation Irish-American who was raised in a Boston suburb, was the architect of Barclays’s investment-banking expansion. He came under fire from politicians for his background in that business and for his compensation. He resigned amid mounting political pressure after the firm was penalized in an interest-rate-rigging scandal.
Looking to Staley “is an acknowledgment that if they don’t get it right in the U.S., they’re going to have a hard time,” said Bill Daley, who was chairman of JPMorgan’s Midwest region before becoming President Barack Obama’s chief of staff. And Staley, to his credit, is good with regulators, Daley said.
Jenkins pledged to reform the bank’s culture, saying the industry had become too focused on short-term gains. He sought to rein in pay, eliminated thousands of jobs and sold assets to bolster earnings. Still, some analysts expressed concern that the firm would struggle to meet targets.
“It became clear to all of us that a new set of skills were required for the period ahead,” Deputy Chairman Michael Rake wrote in the bank’s July announcement that Jenkins was stepping down.
While boosting revenue at Barclays is a major focus, McFarlane also has pledged to press on with cost cuts and divestitures as he seeks to shore up returns and double the bank’s share price over the next three to four years. The company’s investment bank has been plagued by the weakest return on equity, a measure of profitability, of its four units.
McFarlane has said the firm’s next CEO must have experience in that type of business because Jenkins “found it difficult to deal with” shrinking the division. In an interview with the Financial Times published over the weekend, the chairman also said he’s worried that investment banks are losing ground to strong competitors across the Atlantic.
“The challenges that they’re grappling with” are there, said Steven Chubak, analyst at Nomura Holdings Inc. Staley was a “strong operator at JPMorgan” and the focus at Barclays will be on raising profitability, Chubak said.
