The UK-based banking giant Barclays PLC (BCS – Analyst Report) announced an abrupt end of its Chief Executive Antony Jenkins’ three-year tenure with the company, citing the need for “fresh perspective†and “acceleration of execution pace†as the reasons for showing him the door.
John MacFarlane, who has been in office as Chairman for around three months, will serve in Jenkins’ position from Jul 17, until the company finds a permanent successor for the post. Though the move was unexpected, Barclays’ pressurized growth and ambiguity regarding future performance could be held accountable for the change.
Jenkins, who replaced Robert Diamond in Aug 2012, will be paid a salary of £1,100,000 per annum ($1.7 million) along with £950,000 worth of shares as well as a pension allowance of £363,000 and other benefits. Moreover, he will be entitled to a pro-rata performance bonus for the current year.
Barclays has been struggling under a pile of never-ending legal issues, which has taken a toll on its profitability as well. The company created a provision of £800 million ($1,212 million) related to the ongoing investigation regarding the alleged manipulation of foreign exchange rates, which also included such banks as JPMorgan Chase & Co. (JPM – Analyst Report), The Royal Bank of Scotland Group plc (RBS – Snapshot Report) and UBS Group AG (UBS – Analyst Report). The provision impacted its first-quarter earnings unfavorably.
Last month, Barclays’ long-term ratings were downgraded by Standard & Poor’s (“S&P”) Ratings Services by one notch to A- with a stable outlook over uncertainty concerning the availability of government aid in case of a crisis.
The company has been keeping pace with the increasing litigations and settlements with its cost-saving initiatives as well as restructuring efforts. However, improvement in revenues, costs and capital performance are required to boost the company’s financial performance going forward.
Though MacFarlane might succeed in bringing the turnaround anticipated by Barclays, Jenkins’ contribution in managing the company well after the LIBOR rate-rigging scandal is undisputed. The company has gained nearly 70% in the last three years.
However, the strategic changes proposed by Jenkins to make Barclays a more technologically savvy firm did not materialize as expected. His decision to cut down the investment banking division was largely criticized. With the company’s board focused on enhancing profits, Jenkins’ approach led to disagreements with the board over the size of the investment bank and the rapidity of cost cutting.
More branch closures and job cuts can be expected in the near term with the new executive officer inclined towards making the company more efficient and profitable by faster cost cuts. However, it is difficult to state how much the bank will gain under his leadership or to what extent the bank’s performance will get a boost, given the current legal headwinds it is facing.
Currently, Barclays carries a Zacks Rank #3 (Hold).
