How Can Banks Become the Good Guys?

Rich Ricci is leaving Barclays (NYSE: BCS  ) , and the bank will never be the same again. Or at least it won't be nearly as hilarious. It was like if Sack Tackler was a football player. Anyways, Ricci had been head of the bank's investment arm since Bob Diamond -- I know, it just keeps going -- stepped up to fill the CEO role. Ricci's exit has been viewed as one of the last steps in distancing the old Barclays from the new Barclays.

The old Barclays was fined for rigging the LIBOR, bought Lehman Brothers for a song, and was involved in every insurance scandal the U.K. has managed to drag up. The new Barclays is cooperating with investigators and making third-party investigations public. How times have changed.

Cutting the ties
Barclays' new CEO, Antony Jenkins, has made more progress than anyone expected. In the last few months, the bank has made real steps toward honesty about its past failings and instead of justifying them, has accepted their weight. In February, the bank increased the amount set aside to pay out to customers who were missold insurance products and rate swaps in the late 2000s. 

One of Jenkins' main goals is to remove the layers of structure that kept previous CEOs insulated from problems on the front lines. Diamond, who stepped down last year, had insisted that he didn't know that rates were being manipulated. Jenkins new plan appears to ensure that next time something goes wrong, management will have to know.

Ricci was close to Diamond throughout the LIBOR period, but due to luck or position managed to hang on at Barclays longer than his former boss. Jenkins has apparently decided that the bank can't fully move forward with Ricci still around.

Future hurdles
The good feelings emanating from the bank seem to have made investors happy. The stock is up 47% since Jenkins took the CEO role, and it's beat out both the Royal Bank of Scotland (NYSE: RBS  ) and Lloyds Banking (NYSE: LYG  ) handily. But all three firms are staring down the unknown costs associated with current misselling scandals. Analysts have said that the overall cost could run to 10 billion pounds. 

While Barclays recently jumped up in customer satisfaction, according to the National Customer Satisfaction Index, it still lags behind HSBC and Lloyds. This year's actions will be important for the future of the bank. If it can manage its losses from litigation, the steps it's already taken to distance itself from itself may make the difference.

But if financial fortunes turn against it, Barclays may find itself again in the position of making the right choice for everyone, or making the right choice for shareholders. It would be nice to see those coincide more often at all of the banks. Here's hoping Barclays can map a path for everyone. 

Many investors are scared about investing in big banking stocks after the crash, but the sector has one notable stand-out. In a sea of mismanaged and dangerous peers, it rises above as "The Only Big Bank Built to Last." You can uncover the top pick that Warren Buffett loves in The Motley Fool's new report. It's free, so click here to access it now.


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2373852, ~/Articles/ArticleHandler.aspx, 8/30/2014 4:10:27 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement