By Geoffrey Smith
Investing.com -- Have the famous bullet-dodging skills of Barclays (LON:BARC) CEO Jes Staley finally failed him?
The man who survived the fallout for harassing a whistleblower, who saw off the threat of activist investor Edward Bramson and who rode out widespread discontent over bonus cuts (and his own generous pension allowance) has a new problem to deal with: his past friendship with the convicted, and deceased, sex offender Jeffrey Epstein.
Barclays (LON:BARC) said on Thursday that U.K. regulators were investigating the relationship between the two men, amid concern that Staley may not have been entirely straight with the bank about it while interviewing for the CEO job in 2015.
Barclays (LON:BARC) shares took the news badly, falling as much as 3.5% before recovering to be down only 2.3% by 5:15 AM ET (1015 GMT). The FTSE 100 was down 1.5% and the Stoxx 600 Banks index down 1.2% on a down day for markets that were spooked by a big jump in the number of coronavirus cases and deaths due to changes in the way Chinese authorities compiled their records.
The bank said in a statement to the London Stock Exchange that Staley still enjoys the “full confidence” of the board, which has unanimously recommended him for re-election at its annual shareholder meeting on May 2. It added that it’s cooperating “fully” with the investigation. According to previous reports, Staley had visited Epstein on his private island as late as 2015, just before taking the Barclays (LON:BARC) job. Staley said he had had no further communication with the convicted paedophile after taking over as CEO.
The two had had a professional relationship since 2000, when Epstein was a client of the private bank at JPMorgan (NYSE:JPM), which was then run by Staley.
The loss of Staley would risk destabilizing Barclays (LON:BARC) just a time when it is emerging from an acute and prolonged period of uncertainty. In recent months, not only has some of the risk around Brexit receded, but the bank has also drawn a line under the payment protection insurance scandal that lasted most of a decade.
Just as importantly, it appeared to have settled a long-running argument over what sort of bank it should be in the future. Shareholders voted decisively to back Staley’s commitment to a global investment bank – a decision that has paid off with an 11% rise in pretax profit at the unit last year and gains in market share as rivals such as Deutsche Bank (DE:DBKGn) and Credit Suisse (SIX:CSGN) scaled back their activities. Net profit rose 24% to 2.46 billion pounds.
All that gave the bank confidence to raise its final dividend to 6 pence, making 9p for the full year, a yield of around 5%. It also promised progressive dividend increases “supplemented with additional cash returns to shareholders, including share buybacks, as and when appropriate.”
However, the bank still had to warn that low interest rates and “global macroeconomic uncertainty” have made it less likely the bank will reach its target of a 10% return on tangible equity this year, as originally planned. Instead, Finance Director Tushar Morzaria said the bank “believes it can achieve meaningful improvements in returns in 2020.”