Barclays wins over investors in battle with Bramson
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?