‘Backseat driver’ Bramson on road to nowhere with Barclays
Corporate raider is taking his bid to win a place on bank’s board to investors, writes
Don’t underestimate Edward Bramson. That’s the tip Barclays’ bosses have been given as the secretive financier, who last year became one of the bank’s biggest investors, ups his mission to shake up Britain’s 300-yearold lender. Those who have previously been caught in Bramson’s crossfire have warned that this is a man who will not give up.
“The chances of him getting a seat on Barclays’ board are slim, but everyone’s feedback is not to underestimate him,” says one insider. “Some people compare him to the man in the white hat [based on a character in Butch Cassidy and The Sundance Kid] because he’s always there, lurking, and is a bit relentless.”
Barclays’ top brass are now starting to see some of that determination play out. Bramson’s demand for a board seat was rebuffed in September, but a letter leaked last week shows that the 68-year-old now plans to respond by tabling a shareholder vote on “the composition of the board” at the lender’s annual meeting in May.
The move takes the corporate raider’s battle with Barclays up several notches. A board seat for an aggressive activist like Bramson would trigger shockwaves in the City.
Bramson claims that the campaign has so far consisted of a series of “pleasant and polite” meetings quietly taking place behind the scenes. The British-born American built a stake of more than 5pc through his company Sherborne Investors last year and wants to see the investment bank pared back. His latest letter, sent to Sherborne’s investors, argues that despite giving Barclays “ample time” he feels he is being ignored and should be on the inside. Barclays and its roster of advisers, including Goldman Sachs, will continue fighting back.
“If you’re an activist investor you want to go for a company with some low-hanging fruit, but there are no easy wins here,” warns a former senior executive who worked at the bank during the aftermath of the financial crisis. “All the levers have been pulled over the last four years and there are now dead bodies on them. If you’re going to mess with a very complicated bank you need to be a regulatory specialist – I’m not sure how a bully boy activist can add value.”
But Bramson is notoriously persistent. When he was fighting for a board seat at TGI Fridays’ owner Electra, the private equity firm, he said “even if we don’t win the vote, we’re not going away. They [the board] think we’re scum, which is fine. It’s fear of the unknown.” Electra accused his proposals of being “void of substance” and a costly distraction. After a two-year battle, Bramson won.
As one of Britain’s biggest financial institutions and with 80,000 staff, Barclays is a more complicated beast. But critics of its underperforming investment bank will be glad there’s someone piling on extra pressure.
According to Jefferies analysts, the return on equity in the unit is just 7pc compared with 20pc in its cards and payments arm and 22pc at Barclays’ UK operations.
“I have a lot of sympathy with Bramson’s central argument, which is make the low-return investment bank smaller and pay out the freed up capital,” says banks analyst Ian Gordon. “But versions of this ‘sum of the parts’ argument have been in circulation for the past decade. Bramson’s idea would have been more interesting a couple of years back, before the splurge in the investment bank.”
Barclays boss Jes Staley does not share the view that the unit needs to shrink in order to boost returns. His case was helped by recent quarterly results that showed revenues in Barclays’ markets division, which includes the investment bank, rose by almost a fifth, beating US rivals. The ex-jp Morgan banker said this proved that his strategy of diverting cash into the investment bank was paying off.
“I would point out that four quarters in a row we have gained market share,” he said at the time. “The reality of what’s happening with our markets franchise belies the proposition we can’t compete.”
Those on the inside largely agree with Staley. One executive says the struggles still plaguing once-mighty European rivals such as Deutsche Bank could be a major opportunity for Barclays, and there are fears that chipping away at the investment bank could cause an exodus of staff.
“This is a hugely human-capitalreliant business and triggering what Bramson wants will cause people to go elsewhere,” the person explains. “What Barclays hasn’t had is a lot of luck – nobody is jumping up and down to own UK bank stocks … Everybody agrees that the share price is not great, but the performance has gone up.”
Weary investors, some of whom have been through five management teams and several restructures at the bank since the financial crisis, are unconvinced by Bramson’s bid for a seat at the top. One major investor said that while he would welcome a “good refresh” he believes incoming chairman Nigel Higgins, Rothschild’s veteran investment banker who is taking over this year, will do the job.
“If that goes well, we think Bramson doesn’t have much of a plan frankly,” he says. “He’s just having a general moan about performance, he hasn’t come up with a silver bullet. Maybe it’s to save face as his investment has gone down the plug hole.”
Another investor echoes that sentiment, saying he does not want a “backseat driver whose analysis I don’t agree with” sitting on the board.
“If I was sat in that boardroom, I’d say I quite like the direction of travel.”
Bramson will have his work cut out trying to get shareholders to see his point of view, while top Barclays executives will continue their charm offensive. All eyes will be on next month’s annual results.
Activist investor Edward Bramson