15th Apr 2019 12:19
LONDON (Alliance News) - Sherborne Investors Management LP on Monday said it finds no reason to change its view that Barclays PLC is underperforming due to difficulties experienced by the lender's investment banking arm.
Activist investor Edward Bramson, a partner at Sherborne, has long been demanding Barclays scale back its investment banking business, and will be standing at the May AGM hoping to get a seat on the board.
Bramson has spent about GBP900 million to build a 5.5% stake in Barclays through his investment vehicle Sherborne Investors. He was previously re-buffed in an attempt to get a seat on the board.
Last week, Sherborne wrote to Barclays shareholders outlining its issues with Barclays' current strategy of committing "significant" resources to its Corporate & Investment Bank, put in place when outgoing Chair John McFarlane was appointed in 2015.
Barclays replied later in week, saying that it recognises that it "does not yet perform at the level at which it should" but it is focused on delivering returns above its cost of equity. The bank also emphasised that "another strategic overhaul is not what Barclays needs right now".
On Monday, Sherborne issued a further letter, saying Barclays riposte did not address the activist investor's concerns: "We, therefore, find no reason to change our numbers or the inescapable conclusion that the difficulties experienced by Barclays' Corporate & Investment Bank result from its weak strategic position in the modern Corporate & Investment Bank marketplace and we believe that remedies should be approached accordingly. The directors' response letter does not attempt to address this structural issue."
Sherborne clarified that it does not have a problem with Barclays' executive team, describing Chief Executive Jes Staley as having been "extremely effective in delivering on the goals that the board set for them". However, Sherborne added, the senior management "could be successful if given a better strategic mandate".
Barclays has recently revamped its Corporate & Investment Bank, splitting the business into three units. The shake-up saw unit Chief Tim Throsby leave.
Sherborne said: "According to media reports, which we have not verified independently, Tim Throsby, who has since left the business, recently told the bank that the goals that the board has set for the Corporate & Investment Bank and the financial returns that it has promised to shareholders are 'irreconcilable'. We hope that a warning of this nature, from the most senior executive charged by the board, until recently, with carrying out its Corporate & Investment Bank strategy, will increase the board's awareness that the structural contradictions in its strategy that we have consistently pointed out are placing unreasonable demands on management which may well result in further organisational instability."
Of Bramson, Barclays previously said: "His prior investments and our engagement with him suggest he would be a disruptive and uncollaborative influence on the board. He also does not possess the banking experience and skills that we are seeking to add to the board."
Sherborne responded Monday saying: "It seems to us that a board comprised of twelve or more senior business people should be able to accommodate and resolve occasional differences of perspective and arrive at better and more sustainable outcomes for shareholders than a board that cannot. An alternative voice on the board would seem to be healthy for the company and its shareholders."
"After such a long period of avoidable underperformance", said Sherborne, it is asking shareholders to vote in favour of Bramson's election.
Shares in Barclays were up 1.2% Monday at 167.86 pence each.
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