Tim Throsby, who was brought in with great fanfare from a bigger US rival JPMorgan in 2017 to lead Barclays' international division and investment bank and had a reputation for being aggressive, is leaving the UK bank after little more than two years. The trader was hired to head the company's investment banking division with an aim to expand it and compete with the Wall Street's giants. However, just after two years, Mr Throsby has been expelled despite recent market share gains. The reshuffle gives Mr Staley direct control of the still-controversial investment bank that remains unpopular with investors for its poor returns.
Chief executive Jes Staley had said at the time that Mr Throsby was "exceptionally talented" and was accompanied by "awesome" team – going as far as to call it "the most talented management team" he had been a part of. Mr Throsby was one of the bank's best-paid executives and was instrumental in bringing in some senior hires in its markets business.
Activist investor Edward Bramson, who favours shrinking that business, is trying to become a part of the bank's board so that he can cut trading operations. Considering harsh market conditions, the management's reshuffle signals tighter control over the expansion of investment banking operations. The incoming chairman Nigel Higgins, who takes over as chairman on May 2, is thought to have played an important role and had asked Mr Staley to take charge of the division personally. Mr Higgins had doubts regarding Mr Throsby additional role as in-charge of the lender's US consumer and payments business.
The divisions costs, despite increases in trading and advisory revenues, remain considerably high and reported a return on equity of only 7.1 per cent last year, way below its target of 10 per cent, and if one-off tax credits and impairment releases are excluded, it was around 5.4 per cent. In comparison, JPMorgan's investment bank, which Barclays aims to compete with, made a return on equity of 16 per cent. Moreover, Barclays has plunged 42 per cent since Mr Staley took over in December 2015, in contrast to a negative return of 4 per cent posted by benchmark UK banks index.
Additionally, the wider environment does not seem conducive to the investment banking business. UBS boss Sergio Ermotti recently said that the bank's investment banking division's revenues in the first quarter fell about a third and had one of its worst starts to the year in recent history and said the bank would slow hiring and deepen cost cuts. JPMorgan's Daniel Pinto also warned of "high teens" fall in trading revenue.
The management reshuffle will mean that Joe McGrath will be the investment bank's head of global banking; Stephen Dainton will act as interim global head of markets; Alistair Currie will be head of corporate banking. Ashok Vaswani, head of Barclays UK, will be appointed as the Global Head of Consumer Banking & Payments, a newly created role within the Group, and will oversee the investment banking division now.
The company has started focusing on digitising its consumer business in the UK, US and Germany and is investing heavily in technology development. The company has a strong business model, supported by strong fundamentals and 11 million digitally active customers. With management shuffle complete, the period of uncertainty is behind, and the company can start to focus on core areas. Adequate capital, cost efficiency, adequate liquidity and excellent asset quality still makes the bank an attractive stock.
With Bank of England reducing the interest rates to a historic low level, the spotlight is back on diverse investment opportunities.
Amidst this, are you getting worried about these falling interest rates and wondering where to put your money?
Well! Team Kalkine has a solution for you. You still can earn a relatively stable income by putting money in the dividend-paying stocks.
We think it is the perfect time when you should start accumulating selective dividend stocks to beat the low-interest rates, while we provide a tailored offering in view of valuable stock opportunities and any dividend cut backs to be considered amid scenarios including a prolonged market meltdown.