What happens to Barclays if Jes Staley goes?

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The Bank of England’s Enforcement Decision Making Committee is scheduled to be rolled out by the end of March and one of the first decisions on its to-do list may be a big one – the question of whether to require Barclays to sack Jes Staley as CEO. Although the share price has stabilised and the immediate pressure from shareholders seems to have abated, the PRA/FCA investigation into Staley’s actions in trying to find the identity of a whistleblower has yet to complete. The risk is that regulators may feel that the Senior Managers’ Regime will not have credibility unless it takes some big scalps early on.

So what would a Staley-less Barclays look like if the worst comes to the worst?

The first question to answer would be whether the replacement of a chief executive would trigger any major strategic change at Barclays. It is hard to believe that it would, however. The board has endorsed the move back into investment banking and supported Jes over a quite tough period in terms of earnings; it would be strange to reverse course now. And with the Anthony Jenkins experience still fresh in investors’ minds, everyone is aware both that “focus on retail” is not a magic solution for profitability, and that rapid switches in strategy have their own substantial cost in terms of morale and effectiveness.

An investment bank needs someone to lead it, and a replacement for Jes would need to be able to fill that role. But Barclays is not exactly short of ex-JP Morgan investment bankers, with Tim Throsby (head of investment banking), CS Venkatakrishnan (chief risk officer), Paul Compton (chief operating officer) and Tushar Morzaria (CFO) all fitting this description. Morzaria, who was apparently on the shortlist last time might be considered the more natural successor if the board chooses an internal candidate, simply because he has been at Barclays longer and has more familiarity with the rest of the business.

But any new CEO would face a challenge; having inherited Staley’s strategy of bringing Barclays back to investment banking, how do you make it work? Perhaps the clue is in the most recent league table results, which showed that Barclays was regaining a dominant position in UK domestic markets while still struggling to get back into the bulge bracket internationally. Post-Brexit the UK will continue to be a big capital market, even if big international banks choose to locate elsewhere. It will certainly be big enough to support a dominant domestic player. Maintaining a commitment to investment banking as an industry while scaling back its ambitions geographically would represent an evolution rather than a revolution for Barclays, and could even deliver acceptable returns on equity. So perhaps the employees with least to fear from a post-Jes future might be the recent hires in the UK equity research, corporate broking and coverage functions.

Dan Davies, is a senior research advisor at Frontline Analysts and a former banking analyst at Cazenove, Credit Suisse and BNP Paribas.

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