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3 Things to Loathe About Barclays

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LONDON -- There are things to love and loathe about most companies. Today, I'm going to tell you about three things to loathe about Barclays  (LSE: BARC  ) (NYSE: BCS  ) .

I'll also be asking whether these negative factors make the bank a poor investment today.

Since their appointments last year, Barclays chairman, Sir David Walker, and chief executive, Antony Jenkins, have been banging on about creating the highest standards of transparency at the bank.

Barclays announced a 38.5 million-pound payout of bonuses for its top bankers on 20 March this year -- budget day. Whether the timing was a tactic to attempt to keep coverage of the bonuses off the front pages or a crass lack of appreciation that it was likely to be interpreted that way, the episode wasn't exactly the best demonstration of a commitment to the highest standards of transparency.

Bonus culture
In addition to the timing of the budget-day bonuses announcement, the size of the bonuses also attracted criticism from many quarters.

Rich Ricci, Barclays' investment bank chief, was awarded 17.5 million pounds of shares, which he immediately cashed in. The provocatively named banker -- who owns a string of racehorses including the also-provocatively named Fatcatinthehat -- will be leaving the bank in the summer.

Nevertheless, Barclays' chief executive has recently said: "We operate in a highly competitive market for talent and unilaterally reducing compensation without risking the franchise is very difficult," adding that "a further rebalancing of reward between shareholders and colleagues ... will not happen overnight."

Head of remuneration
Cynics who argue that Barclays' executives are giving ground to shareholders only inch by inch, and grudgingly, have been afforded further ammunition by the company's retention of the services of Sir John Sunderland -- associated with the company's old guard -- and head of the remuneration committee.

Earlier this year, before a parliamentary commission, Sir John defended the bonuses paid to disgraced ex-CEO Bob Diamond. The chairman of the commission told Sir John that his comments showed the "bank's culture has not changed at all."

A poor investment?
At his first Barclays' AGM last week, the new chief executive spoke of the values he was seeking to instill in the bank: respect, integrity, service, excellence, and stewardship. He told shareholders: "Cynics will say these will change nothing and I agree that words alone will make little difference. But I assure you these are not just words."

Unfortunately, for the moment, they are just words. However, if you think Barclays' scandals and reputational damage are behind it, the company could make for a good long-term investment.

The shares are currently trading at 290 pence -- just eight times forecast earnings for 2013 with analysts expecting earnings growth to accelerate from 3% this year to 22% in 2014.

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9/27/2016 4:33 AM
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