Bar­clays wins over in­vestors in bat­tle with Bram­son

The Sunday Telegraph - Money & Business - - Front Page - By Iain Withers

BAR­CLAYS’ top bosses are con­fi­dent they can see off the threat posed by ac­tivist in­vestor Ed­ward Bram­son af­ter se­cur­ing the back­ing of the bank’s ma­jor share­hold­ers in re­cent weeks.

The bank­ing giant has be­gun de­fen­sive moves ahead of an ex­pected at­tack by Mr Bram­son’s in­vest­ment ve­hi­cle Sher­borne, which has built a stake of more than 5pc in the com­pany.

It is un­der­stood Sher­borne wants Bar­clays to scale back its in­vest­ment bank and fo­cus on its re­tail and credit card arms in the UK and US to boost share­holder re­turns. But bosses are con­fi­dent that they have the sup­port of ma­jor in­vestors af­ter meet­ing with top20 share­hold­ers, in­clud­ing some which are also back­ers of Sher­borne.

A bank in­sider said fund man­agers were per­suaded of the mer­its of Bar­clays’ strat­egy of stick­ing with its in­vest­ment bank.

“If you have six banks dom­i­nat­ing the cap­i­tal mar­kets and five are Amer­i­can, you want the sixth to be British. In that en­vi­ron­ment it is a huge com­pet­i­tive ad­van­tage not to be Amer­i­can.

“The big funds see you as a di­ver­si­fi­ca­tion point, oth­er­wise they’re just mas­sively ex­posed to the Amer­i­can mar­ket,” the source said.

An­other in­sider said in­vestors wanted the bank to “carry on” with its ex­ist­ing strat­egy and avoid fur­ther costly re­struc­tur­ing.

“They’re say­ing just run it and see if you can shoot the lights out,” the source said.

Jes Sta­ley, Bar­clays’ boss, met with Mr Bram­son in New York ear­lier this month to dis­cuss his views, although no spe­cific pro­pos­als were put for­ward. Sher­borne de­clined to com­ment.

Bar­clays grabbed head­lines last week af­ter be­ing linked with a pos­si­ble mega-merger with emerg­ing mar­kets bank Stan­dard Char­tered.

It is un­der­stood the idea was dis­cussed in­for­mally by some Bar­clays board mem­bers but oth­ers, in­clud­ing Mr Sta­ley, are against any knee-jerk ma­jor deal-mak­ing in re­sponse to the threat posed by Mr Bram­son.

Don’t be fooled by all the noise about a pos­si­ble merger be­tween Bar­clays and Stan­dard Char­tered, which caused great amuse­ment in the City last week. The Square Mile loves noth­ing more than a bit of takeover tit­tle-tat­tle but this par­tic­u­lar deal ru­mour is among the old­est around.

In­deed, spec­u­la­tion about a deal be­tween the two stretches back at least 20 years to when a Sun­day news­pa­per got wind of a cosy din­ner be­tween Martin Tay­lor, then chief ex­ec­u­tive of Bar­clays, and Mal­colm Wil­liamson, his coun­ter­part at Stan­dard Char­tered. Noth­ing ever came of it and the chat­ter soon died down, just as I sus­pect it will this time.

Re­ports that Bar­clays chair­man John Mc­far­lane has been mis­chie­vously ex­plor­ing pos­si­ble deals now that the bank seems to be near­ing the end of a bru­tal and long-last­ing re­struc­tur­ing may well have legs. The Scot is ex­pected to step down next year. Per­haps he can’t re­sist the thought of one fi­nal swan­song, es­pe­cially with ac­tivist Ed Bram­son ag­i­tat­ing for change. Still, I would put the chances of a deal hap­pen­ing at zero. The rea­son? It makes no sense at all, on any ra­tio­nal level.

Jes Sta­ley may have let his heart rule his head when he went af­ter a whistle­blower, but when it comes to bank­ing, the Amer­i­can is no fool. He was at JP Mor­gan when it agreed a $30bn (£22.5bn) merger with Chase Man­hat­tan in 2000 – the bank’s share price took a decade to re­cover.

And the mes­sage from Sta­ley is clear: he hasn’t spent the last few years dramatically rein­ing in Bar­clays’ global op­er­a­tions to undo all that hard work. Some 60,000 jobs have been shed, while £96bn of non-core as­sets have been ditched. The bank pulled out of Africa and has com­pleted a fur­ther 21 dis­pos­als.

Bar­clays in­sid­ers liken it to re­cov­er­ing from “open­heart surgery”. You need to take things easy for a while. Look at Deutsche Bank. Af­ter three con­sec­u­tive years of losses, it is plan­ning 10,000 job cuts. It will take years to re­turn to growth. As for Bram­son, he al­ready looks iso­lated. As we re­port this week­end, Bar­clays’ strat­egy ap­pears to have the back­ing of ma­jor share­hold­ers, in­clud­ing re­tain­ing the in­vest­ment bank. There are six banks dom­i­nat­ing cap­i­tal mar­kets. Five are Amer­i­can, the other is Bar­clays. There is com­pet­i­tive ad­van­tage in not be­ing Amer­i­can.

With lit­tle in­vestor sup­port for a Bram­son-led shake-up, Sta­ley must be feel­ing se­cretly bullish. A big merger would be an act of supreme folly.

‘I would put the chances of a deal hap­pen­ing at zero. It makes no sense at all’

First Group last

Trou­bled trans­port op­er­a­tor First Group faces a crunch week. Rest­less share­hold­ers are on red alert for signs of fur­ther stress as it posts an­nual re­sults.

Af­ter years of pain, in­vestors are thirsty for change, es­pe­cially af­ter a bid from pri­vate equity giant Apollo was turned down with­out con­sult­ing share­hold­ers. Ac­tivist West Face is push­ing hard for ei­ther a sale or break-up but hap­less boss Tim O’toole is re­fus­ing to budge.

He in­sists his strat­egy is the right one, but First Group’s share price sug­gests oth­er­wise, hav­ing crashed 70pc dur­ing his seven-year ten­ure.

Man­age­ment will ar­gue that UK trans­port is a tough in­dus­try right now, and they would be right but only to a point. Na­tional Ex­press has had the good sense to pull out of UK rail af­ter al­most com­ing a crop­per, but is still op­er­at­ing trains in over­seas mar­kets with suc­cess. It is thriv­ing as a provider of cheap but re­li­able coach jour­neys all over the coun­try, and its US school bus busi­ness is do­ing well.

First Group is tipped to post its first prof­its fall since 2013. O’toole did an ex­cel­lent job as boss of the Lon­don Un­der­ground but a new driver and a change of di­rec­tion are badly needed at First Group.

A damp sausage

It would be un­fair to la­bel Wes­farm­ers’ own­er­ship of Home­base a to­tal disas­ter. Af­ter all, the in­spired “sausage siz­zler” made DIY shop­ping that lit­tle bit more bear­able.

Yet se­nior re­tail­ers say the deal was right up there with the worst. New own­ers at Hilco have their crit­ics but they know how to save busi­nesses – the turn­around of HMV has been gen­uinely im­pres­sive. Cru­cial to Home­base’s sur­vival will be the credit in­sur­ers, which in the past have been flighty. Will they do the right thing this time and pledge sup­port?

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