‘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

The Sunday Telegraph - Money & Business - - Business - The week ahead

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

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