The referee is biased, the pitch is tilted against us and we’ve given up trying to predict our results. But, don’t worry, dear shareholders, we’re taking decisive action: we’re cutting your dividend by 54%. Please don’t grumble because it’s for your own good. Your patience will be rewarded – one of these years.
Yes, it’s new-look Barclays, under the dynamic new leadership of chairman John McFarlane and chief executive Jes Staley – “like me, a banking veteran,” says McFarlane, as if that were reassuring. It was certainly a veteran whinge that accompanied Barclays’ 8% fall in pre-tax profits to £2.1bn.
“Outsized” fines and penalties for past misconduct “are not proportionate to our smaller size”, grumbled McFarlane, a plea of poverty that jars with the fact that Barclays still managed to dig deep and pay 323 employees more than £1m last year. Meanwhile, the 62% stake in Barclays Africa, previously advertised as a growth business for decades to come, will be sold down (at the bottom of the market, probably) because today’s regulators are strict about how they calculate liabilities.
At least Staley has jettisoned predecessor Antony Jenkins’ vacuous description of Barclays as the “go-to” bank. In its latest incarnation, Barclays wants to be a “transatlantic” bank, which is easier to understand. There will be a UK bit – which will sit within the new regulatory ringfence – and a corporate and international division, also housed in the UK.
Fine, but the new structure doesn’t answer the perennial question of whether Barclays can make consistent and stable returns in investment banking. Even after Jenkins’ tactical retreats from capital-heavy activities, Barclays isn’t remotely close to financial respectability. The 2015 return on tangible equity in investment banking was a miserable 6%. As ever, investors must give thanks for Barclaycard, which breezes along at 22%.
Staley is the latest chief executive to believe the investment bank requires just one last heave. Maybe he will confound the doubters eventually, but you can’t blame shareholders for feeling that the timing of Barclays’ promised revival has been massively delayed since the chief executive’s arrival in Canary Wharf.
As recently as last October, McFarlane mused that “a high and progressive dividend will in future need to make up a significant portion of our annual total shareholder return”. Now Staley has cut the dividend in half to give “unfettered ability to accelerate the wind-down of non-core assets”.
No wonder the share price is winding down too: it’s now halved since the point at which McFarlane reckoned it could be doubled within three years. And no wonder the chairman would rather talk about beastly regulators and governments.