27th July 2012
There's no doubt that Barclays investors are right to want a fresh start. Questions over its strategy and ongoing search for a new chief executive in the wake of the Libor-manipulation scandal are still hanging over the bank. Fierce criticism was sparked following the scandal over the bank's culture and risk-taking, and now it's considered that what Barclays does to rebuild its brand and restore shareholders' confidence is more significant than the results.
So while champagne corks pop across London as it hosts the opening ceremony of the Olympic Games, the mood in Canary Wharf may be less upbeat as investors wonder what lies ahead for Barclays' future.
So what does the future hold?
Investors are keen for one or both of the new CEO or chairman to come from outside for a revamp of the way things are managed.
After all, for all his achievements, Mr Diamond created a Barclays that never quite gelled with the City. Investors and analysts were suspicious, regulators distrustful, and the world at large often openly hostile to the investment banking leviathan that he rendered inside one of Britain's oldest and most respected lenders, says the Daily Telegraph.
Former J.P. Morgan banker Bill Winters is favourite to be CEO and former UK Cabinet Secretary Gus O'Donnell is front-runner for chairman, according to industry sources and UK media reports, reports This is Money.
But important as pay protests and boardroom change are, there is a more fundamental campaign investors should be waging – to force banks to face up to the new order of things imposed by a weaker economic outlook and a tougher regulatory landscape, argues the Financial Times (paywall). The truth is most of the world's banks are too big and should be broken up.
However, clarity on the strategy is unlikely until the bank appoints a new CEO. On who the public want, Antony Jenkins should be the next CEO of Barclays, according to a poll of Mindful Money readers.
And what does this mean for investors?
Kevin Murphy, of Schroders and a Mindful Money blogger, says: "The day Barclays' fine was announced, the bank's market capitalisation fell some £3.5bn – more than 10 times as much as the fine. This was an emotional reaction by the market, which was essentially giving up on banks as almost uninvestable.
"And yet, over the last three or four years, the banks have been making some steady progress. It may often have felt like two steps forward and one step back – and occasionally like one step forward and two steps back – but they have repaired capital, improved profitability, jumped through all manner of regulatory hoops and endured a great deal of political scrutiny – not least as a result of the report from the Independent Commission on Banking.
"That political scrutiny, which now looks set only to grow even more intense, appears to have been the last straw for the market, which feels it cannot invest in banks because of the associated headline risk. But while headline risk can be deeply uncomfortable – for investors as much as for those making the headlines – it is unlikely to affect whether or not Barclays is a good investment.
"All sectors and all businesses carry headline risk, all the time…These things are part and parcel of being in business and, as often as not, can present those taking a longer-term view with opportunities to invest rather than be wiped out."
Whether Barclays is a good investment going forwards comes down to its fundamentals as a business, balance sheets and the valuation at which its shares are bought. This will all be affected by what happens to its structure and management team in the near future.
And with even former Citigroup chief executive, Sandy Weill, admitting that breaking up big banks might be quite a good idea, it seems that questions over the shape of Barclays will not go away.
Nowhere is the crisis of confidence in banks clearer than Barclays, so it'll be fascinating to see how it shifts this shadow.
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