Barclays Plc CEO Jes Staley is unlikely to bend to pressure from an activist investor to scrap or radically scale back its investment banking business, analysts say.
Sherborne Investment Management LP, founded by New York-based Edward Bramson, revealed a 5.16% stake in the bank March 19. Sherborne has previously used its position as a shareholder to engineer turnarounds of businesses such as F&C Asset Management, where it ousted Chairman Nick MacAndrew and appointed three of its own employees to the board.
There has been speculation that Sherborne could use its stake in Barclays to push for boardroom changes, or to pressure management into selling off the investment bank. Sherborne's fellow Barclays shareholder, the Jupiter U.K. Growth Fund, voiced concerns separately in March about the performance of the investment bank, which has long been a source of frustration for investors.
But Barclays is expected to report strong performance in the first quarter, which is likely to strengthen Staley's conviction that the investment banking business is still worth hanging on to.
"Realistically I would expect Sherborne to pressure Barclays to reduce the size of the investment bank. That will inter alia apply pressure on Staley. He won't want to do it for sure," Robert Sage, U.K. banks analyst at Macquarie, said in an email. A lot of shareholders are likely to share Sherborne's view, but if Barclays goes on to deliver the "stellar" set of results that are widely expected in the first quarter, then matters "could get interesting," Sage said.
Ian Gordon, an analyst covering U.K. banks at Investec, said in an interview that he expected "little appetite for a change in direction" among Barclays' senior management. The bank is expected to report a "materially improved" set of numbers in the first quarter, which Staley and other executives are likely to take as vindication of their strategy, which includes holding on to the investment bank, Gordon said.
Barclays reported a £1.92 billion loss for the 2017 full year, compared to a profit of £1.62 billion in 2016. However, it won shareholders over with the promise of higher dividend payments in 2018 and beyond.
Speaking at the Morgan Stanley Financials Conference on March 20 in London, Staley said it would be "extremely difficult" to split up Barclays and take out the investment banking operation.
"There are lots of businesses in corporate and investment banking that have very good returns ... well in excess of our cost of capital," he said during a Q&A session.
Staley said he had not yet had a conversation with Sherborne about its views on the future of Barclays, but that he "looks forward to them being an important shareholder."