Barclays' investment bankers are in mourning for Bob Diamond

Tomorrow morning Barclays' Chief Executive Antony Jenkins will deliver his new strategy for the bank.  Barclays' investment bankers are braced for the worst: Jenkins has a retail banking background and is seen as antipathetic to the investment bank. At least two thousand investment banking job cuts are expected, along with the closure of entire investment bank business lines and confirmation of lower pay.

Jenkins' retail banking past is the big sticking point for Barclays' investment bankers in London and New York. Whereas his predecessor Bob Diamond had a trading background and was head of fixed income at Morgan Stanley and Credit Suisse First Boston before joining Barclays, Antony Jenkins has spent his entire career in Barclays in retail and corporate banking roles.

"It's farcical," said one Barclays fixed income professional in London who declined to be named. "He's a retail banker. He doesn't understand the investment bank and is being run by the government and the regulator. He's also very bearish, which is no good for morale."

"We're leery of his commercial banking pedigree," one Barclays investment banker in New York told us, also speaking off the record.

It doesn't help that Jenkins said last week that the investment bank had been too "aggressive" and "self-serving" and that Bob Diamond's legacy deserved to be, "shredded."

For the 8,600 investment bankers hired by Barclays between 2007 and 2010, Jenkins' choice of words is a cause for concern. Their worries have been compounded by the fact that Jenkins has foregone his own bonus and has promised to cut pay at the investment bank. “Retail bankers look over at the highly paid traders and think, ‘Why can’t I have that?’”, said Bill Winters, the ex-head of JPMorgan's investment bank when he appeared before the UK Parliamentary Commission on Banking Standards last week. “They don’t realise that three out of ten of those traders will lose their jobs in the next year,” he added.

Winters was speaking in reference to the fusion of Chase and JPMorgan in 2000. Barclays has always combined an investment and retail bank, but in the past Bob Diamond ensured that Barclays' investment bankers were seen as special. Alison Carnwarth, the former head of Barclays' remuneration committee told the Parliamentary Commission that Barclays was "overly protective" of investment bankers' pay. Now Diamond is gone and Jenkins the retail banker is setting the tone.

US-based ex-Lehman bankers brought into the Barclays fold by Diamond in 2008 are said to be particularly unhappy with Jenkins. According to the Financial Times, Barclays bankers in the US have been sneering over Jenkins' various pronouncements and mandatory hour long conference calls on ethics.

Banking analysts said Jenkins is doing the job he was appointed to do. "He's been appointed to be a safe pair of hands and has certainly lived up to that terminology," said Ian Gordon, a banking analyst at Investec.  For Barclays investment bankers paid in deferred stock, there have been upsides from Diamond's departure: since Diamond left in July 2012, Barclays' share price has risen nearly 80%.

James Chappell, an analyst at Berenberg, said the real test of Jenkins' success will be the market's reaction to the strategy announcement. "We'll see whether he gets the benefit of the doubt or not." Diamond wasn't a bad CEO, Chappell added. In fact, Diamond wasn't CEO of Barclays long enough to judge his performance. But he "built a good investment banking business," Chappell said.

The danger for Barclays is that having appointed Jenkins as a retail banking antidote to Bob Diamond, the bank may hurt the investment banking business which generated more than 50% of group profits in the last quarter. "There's always a danger when you appoint a new CEO in a crisis situation that the person who's appropriate to address the immediate crisis will not be the person who fits the job going forward," said Peter Cappelli, George W Taylor Professor of Management at The Wharton School.

Jenkins may be making the right noises when it comes to negating the Libor crisis and to reassuring the British public that Barclays is an ethical place to work, but can he really run an investment bank? For the moment, it seems Barclays' investment bankers aren't really convinced.

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