(MENAFN- Khaleej Times) So antony jenkins is out as Barclays CEO after three years in the hot seat. Jenkins took over in 2012 after Bob Diamond, the man who built Barclays Capital, or Barcap, as Britain's only bulge bracket investment bank, was ousted after epic losses in toxic credit derivatives, the Libor rate manipulation scandal and a public grilling in Westminster. "Mack the Knife" is the City nickname for Barclay's executive chairman John McFarlane, now top honcho.
Jenkins tried to reinvent Barclays's corporate culture. He pledged to boost the group's return on equity to 12 per cent by 2016, though it was only 3.4 per cent in the first quarter of 2015. He focused on the profitable "core" businesses of UK High Street banking, Barclaycard and Africa (Barclays owns Absa). Jenkins pledged to reduce the investment bank's risk-weighed assets from 50 per cent to 30 per cent. Jenkins axed 7000 Barcap jobs, including hundreds of managing directors and exited capital intensive trading and structured finance businesses. He gave the City's enraged regulators the Barcap scalps they sought.
Jenkins inherited an investment bank that contributed 50 per cent of Barclays profits but also dragged it into the morass of a SFO probe, the Libor rigging and foreign exchange settlements scandal. Jenkins hated the flamboyant, chest-beating swagger of the trading room. A lifelong retail banker, he had a charisma deficit that doomed him.
Jenkins was ousted in a boardroom palace coup akin to the one orchestrated by the two Mikes at Citigroup against Vikram Pandit in November 2012. The Pandit coup was the signal for me to recommend buying Citi shares at 25-27. This was a strategic idea in banking that made more than 100 per cent for investors who bought Citigroup at 25-27 since the shares peaked at 56 this summer. Will history repeat itself with Barclays at 254 pence?
Ten reasons why moi loves Barclays? One, like Deutsche and Credit Suisse, Barclay's crown jewel in 2008 was its hugely-profitable investment bank. I remember being mesmerised by Diamond's vision at a event in the Dorchester on Park Lane. He was unlike any of the Barclays retail banking Clem Attlees ("modest men with much to be modest about"!) I met in Dubai. Barclays later exited retail banking in UAE, sold its book to ADIB. Yet Jenkins' strategy to axe the investment bank was just plain dumb. In 2014, Barclays generated £1.5 billion of the £2.3 billion of group profits from the "core" Barcap.
Two, Barclay's Achilles heel is its non-core, legacy bad bank (echoes of Citi Holdings), that lost £1.2 billion in 2014. Yet as non-core is run down, Barclays will release excess capital that will boost its group RoE. This means a valuation rerating, exactly what happened with Citi in 2013-15.
Three, the recent rise in interest rate volatility and post Greece/China currency turmoil is hugely bullish for trading profits at Barcap. The board had to choose between profits and Saint Antony. The board chose profits.
Four, Barclays trades at eight times forward earnings and 0.74 times tangible book value. These are similar valuation metrics that attracted me to Citi in 2012 and enabled readers of this column in KT to position for a 100 per cent windfall in America's third-largest money centre bank.
Five, Barclays Basle Tier One capital is admittedly iffy at only 10.6 per cent. Barclaycard, UK retail and business banking, Absa and now core Barcap can all deliver 10 per cent-plus RoE. The City worries about a dilutive capital raise. I do not. Group RoE was only five per cent in 2014. This will change.
Six, John McFarlane, like Diamond, is a proven money-maker. Jenkins was not. Aviva and ANZ shares rose 60-70 per cent after Mac the Knife engineered their turnarounds. Why not in this ex-Quaker goldsmith bank founded in 1690?
Seven, Jenkins created a bureaucratic nightmare at Barclays, with 375 management committees. Clunkiness, duckies!
Eight, sell side cognoscenti Barclays calculate end-2016 book value as 356 pence. So one of the world's great banking empires trades in a fire sale on the London exchange. Yummy kins.
Nine, Barclays benefits from a steeper US Treasury/UK gilt yield curve and a peak in litigation risk.
Ten, the forward dividend yield is 4.6 per cent. So investors who believe in Barclays get paid to wait while new management works its magic. Credere is the Latin word for belief - and, like Citi in 2012, Barclays is a Credere trade in international banking for me.
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