‘Our stock price is broadly where it was immediately after the global financial crisis, six years ago,” said Barclays chairman John McFarlane last July, sympathising with the bank’s “incredibly patient” investors and vowing to “accelerate the delivery of shareholder value”.
His observation about the share price is now out of date. Barclays has plunged from 280p to 173p – back to where it was in the dark days of 2012 when Bob Diamond was forced to resign as chief executive.
Most banks have slumped in value since last summer, it should be said. Financial stocks, especially those with investment banks, like Barclays, don’t like falling stock markets. The plunging oil price has brought worries about bad debts in the offing. Regulators are not going soft on their capital demands.
In Barclays’ case, there’s a deeper worry. What’s the strategy? Does Jes Staley, McFarlane’s pick as the latest chief executive, have a radical reinvention plan? Or is he going to offer another uninspiring round of cost-cutting?
Never let a good crisis go to waste, advised Bernstein’s analysts, in an open letter to Staley. Their radical formula: get out of Africa, sell the US credit card business, and carve out the investment bank and promise to float it in the US, in effect unwinding Diamond’s purchase of the rump of Lehman Brothers.
The latter idea is the big one and would require Staley and McFarlane to swallow hard. But Bernstein is right that housing a US investment bank inside a UK retail bank is “an absolute investment nightmare” in the new regulatory era. If Staley and McFarlane disagree, they’d better be able to show how the unhappy relationship is meant to work. To many observers, it looks fundamentally dysfunctional.
