If ever there were a study in chutzpah, it was Barclays CEO Jes Staley at Morgan Stanley’s financial conference yesterday. While Deutsche Bank’s shares plummeted following CFO James von Moltke’s warning that the investment bank is having a difficult first quarter and DB is contemplating more “radical” action if necessary, Staley fielded questions about Barclays' strategy with an impressive display of denial.
"All strategic opportunities are out there," said Staley in a nod to the fact that Barclays too could undergo something radical. But Barclays' intends to pursue it strategy of improving revenues and returns in the investment bank, added Staley, saying the bank "would not deviate" from this. Thanks to Staley's ebullience, Barclays shares fell be a mere 2%.
Staley's unwavering conviction in his strategy is impressive given the growing realization that 2018 is not turning out be the sort of year when sales and trading reveues grow after all. Deutsche Bank warned yesterday that its securities business is struggling to match the first quarter of 2017 and that it may therefore need to "prune" costs as appropriate. Tidjane Thiam, CEO of Credit Suisse, said the first quarter had been, "confused:" "January was a strong month, February was strange and March is a bit all over the place.”
A banking analyst told Bloomberg he remains "skeptical" of Staley's strategy. The pressure on Staley and his J.P. Morgan-derived top team, "must be intense," the analyst added, not least because of the arrival of activist investor Edward Bramson who reportedly wants to double Barclays' share price, possibly by divesting the investment bank which guzzles capital and generates almost no return.
Naturally, Barclays has contemplating doing the deed and casting the investment bank adrift. Bloomberg says the board met at a "Palladian mansion" 30 miles out of London last summer and discussed the feasibility of doing the deed. Heads of bank functions have also reportedly been asked to model the process of splitting the bank's support operations into those relevant to the investment bank and those relevant to the rest.
For the moment, though, Staley is unwavering. Last year there was a rumour that Staley got into a wrong car after an investor meeting and refused to budge. Whilst almost certainly apocryphal, there are parallels in his current position: Barclays' strategy looks a bit like wishful thinking. Its CEO is never going to admit that.
Separately, PoetsandQuants notes that the value added of an MBA qualification isn't what it used to be. For years the rule was that whatever you spent on a year's MBA tuition, you got four times that back in your first year's starting salary. Not any more. Although starting salaries have risen, fees have risen faster. The ratio of first year salary to fees has now fallen to 2.09 at Stamford and 1.9 at Harvard. Suddenly an MBA isn't as compelling after all.
Before Barclays chairman John McFarlane hired Jes Staley, he said he favoured shrinking the investment bank, maintaining or increasing the dividend paid to investors, and buying more of Barclays’s profitable Africa business. Staley reversed all those positions. (Bloomberg)
James von Moltke said the stronger euro is creating a headache for Deutsche Bank. (Bloomberg)
Deutsche Bank shares fell 7% yesterday, to their lowest level since 2016. (Financial Times)
Blame the wrong kind of volatility: "People are just sitting on the sidelines." (Bloomberg)
Citi hired Alexis Maskell from HSBC as head of EMEA financial sponsors just 15 months after he joined from Deutsche Bank. (Financial Times)
Ex-BlueCrest partner has new hedge fund: Systematic Quantitative Strategies Partners (SQSP) (HFM Global)
The greater the gender equality in a society, the fewer the women who want to work in STEM. (BPS)
Everyone wants to work for Amazon. (Business Insider)
Google cloud blockchain. (Bloomberg)
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