Barclays eyes retreat from crop trading

Barclays is considering exiting agricultural commodities trading as part of the UK lender’s attempts to rebuild its battered reputation after a series of scandals.

The possible retreat from the controversial business is part of a strategic overhaul by the bank’s new chief executive Antony Jenkins, who is screening the reputational impact of every business line Barclays operates in.

Rich Ricci, chief executive of the corporate and investment bank, said he was looking through “the primary lens of reputational risk” with his own, almost finished review of the investment bank’s operations.

“If I decided to stop trading soft agricultural products it is not driven by regulation. It is because it doesn’t sit socially well with the large constituent of our customers,” he said at the Parliamentary Commission on Banking Standards on Wednesday.

He said both the bank’s much criticised tax advisory unit and its agricultural trading were good businesses for the lender from a pure revenue perspective but had too many reputational risks.

The move comes as investment banks around the globe are reviewing their business models in the light of tighter regulation, stricter capital rules and public scrutiny on business practices and scandals such as the alleged Libor manipulation.

Mr Jenkins, who started in August after the bank’s settlement over the manipulation of Libor swept away his predecessor, is assessing every business line from a reputational, cost of capital and performance perspective as he aims to present a strategic overhaul by February. The results of Mr Ricci’s review will flow into that assessment.

Several large investors in Barclays have urged Mr Jenkins in recent weeks to follow the example of Swiss rival UBS by taking the axe to its investment bank.

Commodity trading has been an area of strong growth for Barclays in the past decade. It has for many years ranked among the top three banks globally in terms of revenues, but it has last year lost some market share to rivals.

The trading of agricultural products such as sugar, coffee and milk is only a small part of the bank’s overall commodities trading unit.

The sector has come under intense public scrutiny in the past few years after some politicians and non-governmental organisations blamed market speculation for sharp price rises in the wake of droughts, rapidly rising demand from China and the impact of climate change.

Mr Ricci’s comments on the bank’s plan to overhaul its culture and business practices drew some sceptical remarks from Mark Garnier, chairman of the commission’s panel on corporate governance.

He said reputation had become a competitive issue for banks and asked if this was just “a cynical attempt to try to gain more customers”.

However, Mr Ricci said management was fully aware that there had been some cultural failings in parts of the organisation.