Barclays new CEO faces stress test on first day

Fri Nov 27, 2015 7:43am EST
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By Steve Slater and Simon Jessop

LONDON (Reuters) - Welcome to Barclays: At roughly 6 a.m. on Jes Staley's first day as its new chief executive next week the Bank of England will tell him whether the British bank has enough money to survive a deep recession.

Barclays (BARC.L: Quote) is expected to 'pass' the regulator's financial healthcheck on Tuesday, but already analysts and investors say a tougher test in 2016 could cause Staley to consider cutting the dividend. At least the timing of the 'stress test' demonstrates that the job of managing Britain's third biggest bank is never dull.

That was made even clearer this week when Barclays was hit with its seventh fine in the past six years by Britain's regulator for past wrongdoing, this time for cutting corners when vetting rich customers in a case where executives went so far as to buy a special safe to keep the identity of the clients secret.

Boston-born Staley, a former head of investment banking at U.S. bank JP Morgan (JPM.N: Quote) who fixed a stutter at high school by joining the debating team, faces a raft of challenges.

Taking a similarly brave approach to these problems could result in radical action being taken to revive the 325-year-old bank's fortunes, analysts and investors say, such as spinning off its investment bank and relocating it to New York.

"Clarity on strategy is needed, with perhaps only a break-up able to crystallize value," said James Chappell, an analyst at Berenberg. "Our preference remains for a full separation of the investment bank with a listing in the U.S."

But Staley first needs to define the investment bank's strategy, after multiple shifts in recent years.

The bank's latest fine also shows there's still work to do to put past problems behind it and improve culture and standards, and Staley said when he was appointed a month ago the bank must avoid "adversarial" relationships with regulators.   Continued...

Jes Staley speaks during a panel discussion at the Institute of International Finance (IIF) annual meeting in Washington September 25, 2011. REUTERS/Yuri Gripas