Welcome to your new Transatlantic Bank. Didn’t it used to be called Barclays? Well, yes, but that’s before Jes Staley turned up in December and started lopping off great chunks of it. You know what Americans are like, too: most of them don’t even have a passport.
So he’s giving anything a bit foreign the chop. He’s getting out of Africa, home to Barclays for a century, where it employs 44,000 staff in 12 countries. Plus the Asian wealth wing. And the investment bank’s offices in South Korea, Taiwan, Malaysia, Indonesia, Thailand, the Philippines, Australia, Russia and Brazil. Going, too, is the dividend: an increasingly foreign concept nowadays, anyway, and soon to be more than halved to 3p.
And guess what? All that will “simplify the group”. No kidding. Mr Staley’s “transatlantic bank” is being simplified down to retail, corporate and investment banking in Britain and America, with Barclaycard thrown in. Only English-speakers in this bank, please, if that’s actually the language on both sides of the Atlantic. True, Mr Staley is probably right that this shrunken affair will produce better returns on average tangible equity than 2015’s minus 0.7 per cent, when Barclays racked up £394 million of losses, even if adjusted returns were 5.8 per cent. But is he really saying there’s no future for banking in Africa?
Well, not quite. He just doesn’t like having 62.3 per cent ownership of Barclay’s Africa operations and 100 per cent of the regulatory costs. The plan is to cut the bank’s Africa stake to a minority that doesn’t need consolidating. Yet, even with these regulatory handicaps, Africa still had tangible equity returns of 11.7 per cent last year, almost twice the investment bank’s. And it was only in January that Mr Staley said Barclays remained “committed” to a strong presence in Africa. Chairman John Macfarlane has said similar things, too, which may explain the rumours of a board split over Africa, whatever Mr Staley’s denials.
The shock two-year dividend cut, so conserving £1.2 billion annually, will help Mr Staley to restructure the litigation-prone bank quicker. Or so he says. Yet that’s one of the problems with Barclays. Mr Staley is the fourth chief executive this decade and even if he’s an improvement on his sanctimonious predecessor Antony Jenkins, all you ever get with Barclays are endless jam-tomorrow strategy changes.
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Meantime the shares, 8 per cent lower yesterday at 158p, are 40 per cent below where they were in July when Mr Jenkins was sacked. They now trade at just 0.6 times book value. If going transatlantic doesn’t work, there’ll be even less to sell.
Icing on the cake
Some secrets you just can’t hide from the Takeover Panel. Take the one from Intercontinental Exchange, owner of the New York Stock Exchange. Apparently it’s “considering making an offer” for the London Stock Exchange. Who would ever have thought that? Apart from absolutely everyone.
ICE has been pondering that very subject just about every day of its existence. Not that it’ll be too bothered the news is officially out. At the very least it can now trouble-make, at minimum expense, so messing up the heads of those LSE investors not overly gruntled with a “nil-premium” merger thingamajig with Deutsche Börse.
And ICE could even make an offer, bidding to add the LSE to its collection of London assets: the International Petroleum Exchange, derivatives outfit Liffe and Trayport, the energy trading platform. The timing isn’t great, with ICE still digesting October’s $5.2 billion purchase of Interactive Data Corp, yet ICE is worth $28.4 billion, deep enough pockets for a pop at the £9.4 billion LSE.
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Why stop at ICE? CME Group, owner of the Chicago Mercantile Exchange, is bound to be considering joining the fray, even if it does nothing. And you’d think a cash-and-shares offer from either would be enough to break up the LSE’s cosy deal with Deutsche. Unless, of course, the pair put an even bigger synergies figure on the table than the market expects. Analysts have pencilled in £250 million to £500 million, so proving they have little idea. There’s talk the figure will beat the top end of that.
Ivan the evangelist
Who says you can’t teach an old dog new tricks? Ivan Glasenberg, the Glencore boss, had to be dragged kicking and screaming into some proper balance sheet repair. But now he’s got evangelical. Having cut net debt by more than $4 billion in six months to $25.9 billion, he’s targeting $15 billion by the end of 2017. Do that, while continuing to throw off $3 billion of free cashflow, and Glencore will be able to pay much of it out in dividends, while maintaining the investment grade credit rating its trading book needs.
So what took him so long? True to form, Mr Glasenberg is not one to admit he got it horribly wrong. As he points out, copper didn’t fall below $4,000 and it’s hard to tell yet whether Glencore even needed to raise $2.5 billion fresh equity at 125p, 5½p below last night’s close. Indeed, if his bullish view on China turns out to be right, Mr Glasenberg may soon be claiming it didn’t.
Who’d want to be?
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It’s tough being a billionaire. The 1,810 that made the Forbes annual list have seen their ranks shrink by 16. Worse, they’re now rubbing along on an aggregate $6.48 trillion, down from $7.05 trillion the previous year. Still, at least it’s not all bad news. Some are relatively richer. Amazon’s Jeff Bezos, Facebook’s Mark Zuckerberg and those Google twins Larry Page and Sergey Brin have moved up the list. More proof that tax avoidance pays.