November 25, 2012 10:00 pm

Investors urge Jenkins to split Barclays

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Some of Barclays’ biggest investors have urged Antony Jenkins, the bank’s new chief executive, to take an axe to its investment bank.

At meetings with investors in recent weeks, at least three of the 30 biggest shareholders have told Mr Jenkins and other senior Barclays executives that the UK group should consider following the example of UBS of Switzerland, which last month signalled a dramatic retreat from the fixed-income side of its investment banking business, alongside 10,000 job cuts.

“The 20 per cent pop in the UBS share price has got investors’ juices flowing,” said one bank insider, suggesting that the idea of closing Barclays’ equities business or spinning off the whole investment bank was gathering shareholder support.

At a seminar with Barclays investment bank executives on Friday, several investors expressed “dismay and exasperation” at the still largely unaltered strategy for the investment bank, according to someone familiar with the meeting.

Most investor feedback has taken place at a series of one-to-one meetings that Mr Jenkins has held with shareholders and prospective investors in recent weeks.

The chief executive, who started in the job in August, has been garnering investors’ views ahead of a strategy overhaul in February. Part of this is a performance analysis, breaking the bank down into 75 operating units and assessing each one’s cost of capital and return on equity. He is undecided on what to do with the investment bank, according to people close to him.

Investors say the direction of regulation and political sentiment have added to the logic of separating retail and investment banking operations. The Vickers reforms, and their central idea of ring-fencing, are due to be implemented through legislation next year. In addition, the European Union is considering a different ring-fencing plan.

One top 10 investor in the bank said: “We have had discussions with Barclays and other banks over ring-fencing or splitting up investment banking and retail.”

One person close to Barclays said it would be misleading to suggest such views were representative: “The feedback from most investors is that they like the mix of the business because it adds stability.”

The bank has been working for several months on a project to prepare for the prospective ring-fencing requirements, in part by creating operating subsidiaries and other mechanisms to make it easier to wind down the bank in a crisis.

It is now considering how it might pre-empt legislation by creating a “synthetic ringfence” that would reconcile both models, according to people familiar with the project.

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