Bramson will lose the battle but may win the war
Activist investor Edward Bramson will be hard-pressed to succeed in his bid to get a seat on the board of Barclays. But his push to get the firm to retreat from investment banking could well find a better reception among weary investors.
Bramson looks unlikely to convince Barclays’ shareholders that he merits a place on the board, particularly as the hedging arrangement he enjoys in his stake misaligns him with other investors. The argument in his firm Sherborne’s letter this week was not entirely robust, notably when it chose to compare Barclays with US banks rather than its European peers.
But his broader anti-investment banking message is likely to filter through.
Indeed, it may already be having an impact. Group chief executive Jes Staley has installed himself as direct head of the corporate and investment bank, complaining of a return on equity that is too low. But some bankers fear the shake-up could usher in another period of uncertainty for the division.
It has been a difficult period for investment banks, with the torrid market at the end of last year followed by thin deal flow and weak trading revenues at the start of this year. First quarter results are expected to be atrocious for the sector.
Will investors accept this as a passing bad patch? Barclays’ stock has lost a third of its value over the past five years; patience may be wearing thin.
Management at some smaller European players seem to believe it is secular rather than cyclical: witness Nomura’s retrenchment in EMEA.
Barclays is one of a few European names that pitches itself in the global top tier of investment banking. Can this last? Bramson’s ideas may take root and sprout, whether or not he is still around at that point.