£14trn investor body wades into Barclays debate

Sky News has learnt that the Investor Forum has been asked by major institutional investors to engage with the bank’s board on a series of key questions that will define its future.

City sources said this weekend that the Forum, which is run by Andy Griffiths and chaired by Simon Fraser (himself a former Barclays director), had written to the lender to raise a number of concerns in recent weeks.

The disclosure of the forum’s interaction with Barclays comes just four days before the bank’s shareholders vote at its annual general meeting on whether to hand Edward Bramson, an activist investor, a boardroom seat.

Mr Bramson, whose Sherborne Investors vehicle owns just over 5% of Barclays, is expected to lose the ballot by a wide margin, but is likely to persist with his efforts to persuade the company to shrink the most capital-hungry trading operations in its investment bank.

He has argued that Barclays’ mid-ranking position in many investment banking products has left it hamstrung by a high cost base and unable to produce the returns for investors which make tying up so much capital justifiable.

Barclays’ retort has been fierce, suggesting that Mr Bramson’s thesis is riddled with errors and that it is taking the necessary steps to improve returns in its wholesale business.

The debate between them echoes one that has been raging in the City for many years, and goes to the heart of whether Britain will be able to boast a global investment bank of its own in the years to come.

A source close to one member of the Investor Forum said its decision to engage with Barclays was highly significant.

It reflected, they said, the frustrations that many shareholders continued to feel with a company that had endured a decade of tumult since the financial crisis, despite the fact that it was not directly bailed out by the government.

The forum rarely comments directly on its corporate interventions, usually disclosing them only in its annual report.

One insider said Barclays “needs to convince investors that it can address the issues in front of it and not just focus all its efforts to repel the approach [from Mr Bramson]”.

“It has taken too long to get to this point, hence the frustration that they feel.”

This week’s AGM comes at a crucial time for Barclays for several reasons, with veteran investment banker Nigel Higgins about to replace John McFarlane as its chairman.

Shareholders have detected Mr Higgins’s influence already, with the departure of several board members announced amid plans to shake up its crop of directors.

The company’s chief executive, Jes Staley, has also announced an overhaul of his executive team, including the departure of his investment banking boss, Tim Throsby, after little more than two years.

Last week’s first-quarter results presented a mixed picture, with Mr Staley insistent that it had outperformed Wall Street rivals.

Nevertheless, there remain scant signs of a sustained upturn in its investment bank’s performance, particularly during a period of anaemic corporate activity in its home UK market.

That has left Barclays’ shares trading at just 161p, giving the bank a market capitalisation of close to £28bn.

When he was named as its chairman in 2014,? Mr McFarlane pledged to double the value of the shares, which then stood at around 260p.

Many investors believe he harboured a desire to break the group up completely and merge its investment bank with Standard Chartered, the emerging markets-focused lender which is listed in London.

Fund managers have continued to express dismay about issues such as pay at Barclays, and have been urged by one proxy adviser to oppose the bank’s remuneration report this week.

The Investor Forum was established following a review commissioned by Sir Vince Cable, the former business secretary and now leader of the Liberal Democrats.

Since it was set up three years ago, it has engaged with companies such as Sports Direct International and Worldpay during periods of concern about corporate governance or broader business performance.

While it has no formal powers, the forum’s members are among the world’s most influential investors.

Its directors include leading fund managers, governance experts and corporate figures such as Sir Peter Gershon, the chairman of National Grid.

The forum’s most striking success to date was its role in forcing Unilever, the consumer goods giant behind Dove and Magnum, to ditch a plan to scrap its British headquarters.

A source at one institutional investor said that Barclays represented a situation “as big as Unilever in terms of investor appetite for the board to find a constructive solution”.

Barclays said on Sunday: “We engage positively with all our major shareholders.”

The forum declined to comment.

2019-04-28T21:09:05+01:00By |

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