Why Bob's Barclays ascension may be a bad thing
Bob Diamond is becoming the new CEO of the entirety of Barclays.
If you work at Barclays Capital, this may seem just great. Bob is now totally in charge.
However, any such supposition may be simplistic. Yes, Bob Diamond - the great progenitor of Barclays Capital, is in control of the whole Barclays Group, but we see downsides.
And those downsides will be:
1) Greater political pressure
John Varley was always fairly placatory. However, Bob Diamond is a) an investment banker, b) American. The confluence of these two factors, plus his historically enormous pay packets and moniker as the 'unacceptable face of banking' mean BarCap will be at the forefront of any future UK bank bashing/ calls for banks to be disintegrated. BarCap may even feel disinclined to pay well as a result.
2) Bob will need to show willing to kill his babies
Bob is BarCap. He has built it from nothing into a world class, globally active, nearly- -top-ranking-mega-bank.
However, BarCap may be in for a hard time. In a research note today, Morgan Stanley analysts are predicting that BarCap will achieve only 40% of the incremental revenues it's currently targeting. This year they're expecting top line income will fall 27% year on year, while in the third quarter they're predicting a 14% reduction in revenues at BarCap.
Combined with the first half's big BarCap spending splurge, all of this could put pressure on Bob to show that he's realistic about the (diminished) growth prospects for his baby. Morgan Stanley analysts are predicting another 500 job cuts in the fourth quarter.
3) Peevishness among ex-Lehman staff
Bob is off to become the ruler of Barclays, but he does not appear to have done much to promote ex-Lehman staff in his wake. His replacements as BarCap CEO, Jerry Del Missier and Rich Ricci are both non-Lehman people. In the FT's graphic of who's who at BarCap, ex-Lehmanites occupy only 3 of the 13 spaces. What with waning FICC revenues and BarCap's increasing reliance on equities and IBD to boost future income, ex-Lehmanites may feel undervalued by Bob's failure to reward them with more recognition. Internal strife may ensue.
