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Barclays’ share price (LSE:BARC) jumped over 7.0% by early afternoon as investors responded positively to the bank’s 2012 results and Antony Jenkins’ promised strategic review. The stock was up 21.25 to 322.75 in early afternoon trading.
2012 Results
Quoting Maxwell Smart, Barclays “missed it by that much,” falling just shy of market expectations of £7.07 billion is pre-tax profits at £7.05 billion. The final figure was a 26% improvement on 2011, which included a 46% increase in in Corporate and Investment Banking and a 52% increase in Wealth and Investment Management.
Revenue was up 2.0% over 2011, coming in at £29.04 billion. Average shareholder ROE was up for 6.6% in 20122 to 7.8% in 2012
Strategic Review Results & Actions
On most days a company’s year end results are news enough. But analysts and investors have been foaming at the mouth, waiting, not so much for the review results, but for the revelation of the plan that Jenkins and his team will begin implementing to change the bank’s core policies and its course of business. Jenkins launched right into his announcement, making his position quite clear and putting teeth to the promises he has been making since taking over in August 2012.
“We intend to change what Barclays does and how we do it and have set out clear commitments against which our progress can be measured. Our goal is to make Barclays the ‘Go-To’ bank for all our stakeholders. The plan that we set out today is critical to delivering that goal. I am determined that no-one should be able to question our intent or our commitment to the path that I have set out.”
He told an audience last night that “My absolute conviction is that there is no choice between doing well financially and behaving well in this business. Indeed, I believe that we will not be able to generate sustainable returns over the long term unless we act at all times with good values.”
Perhaps the action that was most clearly heard was that 3,700 jobs would be cut. Reviewing earlier statements by Jenkins, we can assume that some of those will happen as a step toward cutting some fat and increasing efficiency whilst others will occur as part of the closure or divestment of selected business units. On the upside, relatively few of the job cuts will be in the UK.
Speaking of closures, 32 business units will be affected, some, but not all by closures. Suffice it to say that each of the affected businesses with feel BARC’s bite in one way or another. The review has put each unit’s contribution under the microscopes of “strategic importance, reputational damage, and potential profitability.”
This writer applauds Mr. Jenkins for his understanding that cause and effect are not necessarily closely related in time and space. He expects a somewhat flat 2013 as steps are taken and measures are implemented. By 2014 he expects substantial results that will improve the business operationally and continue to build customer confidence.
Jenkins recognizes that “It will take years before people change their impression of us.” That has to be the reason that the actual strategic review is presented in three sections of logical, sequential order: Turnaround, Return Acceptable Numbers, and Sustain Forward Momentum.
One of the key features of the strategy, and one that other banks and business institutions need to follow, is “A strong culture as the first line of defense against repeating the mistakes of the past.” Compliance staff will now operate completely independent of business and regional management. In effect, operational audit will be conduct by what will now be a third party, the most effective means of corporate control of policy and procedures.
Perhaps the most encouraging part of the Mr. Jenkins presentation was the presentation of eight commitments Barclays has made upon which they will transform their business. Even more impressive is the fact that the bank will publish semiannual updates on the progress related to each commitment and will issues and annual scorecard assessing the bank’s performance.
Now that’s the way to run a bank and that’s the kind of leadership that the public will respond to in a positive way. It’s also the only kind of setting in which the effect is drawn more closely in time and space to the cause. It may not take as long as Mr. Jenkins thinks to win back public confidence.
