Morning Coffee: Bizarre behaviour at Barclays, and the most competitively paid man at Deutsche Bank
When a person tries to achieve two completely contradictory goals at the same time, it often results in some very strange behaviour. When a company, like Barclays, is simultaneously trying to pursue its CEO’s strategy and to address the concerns raised by an activist investor who visibly and publicly hates that strategy, a similar outcome at the corporate level was always likely.
So, at present we have a situation in which Barclays is on one hand publicly committing to cost reduction and on the other hand employing people from Claridges to make its “front of house” look posher and more like a premium experience. On the one hand, pledging to “cut back on big-salaried employees” and on the other hand putting Richard Gnodde and Anthony Gutman of Goldman Sachs on retainer to lead the activist defence. Oh - and, apparently, hiring someone to dress up as the Easter Bunny and hand out chocolate to female employees.
It all gets a bit more serious, though, when this sort of behaviour starts to affect the way that the business is run, particularly in the investment bank. Barclays can actually point to a reasonable track record; Staley noted at the most recent results presentation that it has gained market share from its main US competitors for six consecutive quarters. Surely, though, unless this was pure luck, credit for the smart hiring and decision making that delivered this result ought to go to Tim Throsby, who was actually running the investment bank?
But Throsby is a name that can’t be uttered in Barclays any more – it seems he was fired because you can’t eat market share gains in an environment of collapsing revenues for the industry as a whole, and because he wanted to keep Barclays’ strategy based on long term structural improvement rather than a short term cyclical return on equity (RoE) target. To an outside observer, whatever the “personality issues” between the investment banker and the CEO, Throsby looks eminently sane.
For the time being, Staley is effectively running the investment bank himself, so he will at least have to face up to the franchise consequences of trying to hang on to dealmaking talent while threatening to cut bonuses. But while Edward Bramson continues to be taken seriously by the company’s investors, it will be difficult for him to be sure that his investment banking strategy has the unequivocal support of his new chairman, Nigel Higgins. The AGM this week should prove to be something of a showdown – either Bramson will get elected to the board or he won’t. Most analysts seem to think that he won’t, but that he might get enough votes to make a credible showing and continue to push his agenda. If that’s true, we can expect Barclays strategic direction to continue hopping around like an Easter Bunny, but potentially with fewer and fewer goodies to distribute.
The Deutsche Bank board, on the other hand, seems to have fewer problems with paying top salaries. At least, they’ve made their own chairman, Paul Achleitner, the best paid blue-chip chairman in corporate Germany. At €858k, his pay package is slightly more than double the average compiled by consulting firm hkp, and significantly more than the chairmen of Fresenius, BMW and Volkswagen.
To some extent, of course, this reflects the fact that Achleitner has worked harder for Deutsche Bank than you would expect from a typical supervisory board chairman. Most of his peers are content to chair the board and exercise an oversight role, but Achleitner has spent the last twelve months second-guessing CEOs, sacking John Cryan, carrying out investor relations work with HNA and finally attempting to originate the merger deal with Commerzbank. As corporate Germany’s highest profile investment banker of the last couple of decades, it’s only natural that his services come a little bit dearer than the run of the mill.
On the other hand … it’s hard to see any positive effect from all this work on the Deutsche Bank share price. Indeed, it’s frequently been suggested that one of Deutsche’s most serious strategic problems is the tendency of the supervisory board to interfere in matters which ought to be the responsibility of the management board. Perhaps Deutsche Bank ought to consider whether it would be possible to pay less and get a less hyperactive chairman in the role.
JP Morgan has now publicly confirmed that the Dorchester, the Beverly Hills Hotel and all others owned by the Sultan of Brunei have been flagged as forbidden in its internal booking system. They join Deutsche Bank (and potentially other banks that haven’t announced it yet) in boycotting the Sultan’s properties over the imposition of the death penalty for homosexuality (FT)
After three and a half years of his sentence, LIBOR trader Tom Hayes has been moved to Ford Open Prison, one of the lowest security jails in the UK. He will be allowed out to work on day release and even spend the night with his family. (Financial News)
Although the Deutsche-Commerzbank deal is dead, the DWS-UBS one still seems to have talks ongoing. A merger would solve some strategic problems for UBS, and Deutsche could certainly use any positive capital consequences. (FT)
Congratulations, we think, to Steadview Capital, a new hedge fund which has set a record for the highest ever rent per square foot to be paid in London’s Mayfair (Evening Standard)
Although equity analysts keep writing notes saying that Deutsche needs to make more cuts – in the USA, in equities, everywhere in the investment bank – there seems to be no support for this idea from the executive team, or from the supervisory board. Potentially good news for employment prospects. (Bloomberg)
But in general, the job market looks bleak, with many banks cancelling hiring plans and the prospect of “hundreds” of cuts, with the bulk of them falling on London. (Financial News)
Although leaks from the Department of Justice suggest that it may be pursuing criminal charges relating to the 1MDB scandal, David Solomon says he hasn’t had any discussions of that sort yet. He’s filled in the time by “reflecting” with senior executives on how Goldman came to hire a guy like Tim Leissner in the first place. (Bloomberg / CNBC)
And the French regulator has ruled that if you snoop on the phone messages of the person sitting next to you on the Eurostar and find out about a takeover, it’s fair game to put together a team of bankers and try to get into the deal (Bloomberg)
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