Does Bob Diamond have polish for top job?

Barclays thinks so and has appointed the prickly investment banker as its new chief executive
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The Independent Online

Barclays could have taken the diplomatic route and chosen a compromise candidate from outside as its new chief executive, or it could even have persuaded John Varley to stay on beyond the seven years he said had been agreed for his tenure when he was appointed to the top job at the bank in 2004, at least for as long as the Banking Commission is deliberating on the future of the industry in the UK.

Instead, the bank has opted for confrontation in selecting the inspired, but frequently irascible, Bob Diamond as its new leader, in the knowledge that he would probably leave if he was passed over again. Chairman Marcus Agius yesterday said the company would participate fully in the deliberations of the independent Commission, set up by the Coalition in the wake of the devastating impact of the financial crisis on Britain's economy. Seeking to second-guess its deliberations now would be "disrespectful", he told journalists.

But make no mistake, the promotion of Mr Diamond, currently serving as president, to run the 300-year-old British institution makes the bank's position clear. Mr Agius may not say so publicly, but if the commission recommends breaking up the banks, and the Government follows its lead, Barclays will be off across the Pond. Mr Diamond probably won't find it too hard to convince shareholders that the US, where banking reform doesn't extend as far as breaking up big institutions (or even taxing them much extra), is a better home for his business. If that means shearing off the UK retail arm, so be it.

In all this, one thing is certain: Barclays will rarely be out of the headlines in the months to come. Mr Diamond will make sure of that.

Mr Varley, who beat Mr Diamond to the top job last time, is a veteran with more than 20 years at the group. The former finance director, MCC member and doer of good works is outwardly urbane and polished, every bit the diplomat (although one doesn't get to the top of an institution like Barclays without having sharp elbows).

People who have worked at Barclays (as opposed to Mr Diamond's fiefdom of Barclays Capital) also say his business skills are underrated and that he has quietly done much of the "heavy lifting" that has seen Barclays transformed from a UK business with some overseas interests into a global superbank sitting at the top table of international finance.

By contrast, Mr Diamond, a former academic who started a second career in investment banking at Credit Suisse, can appear thin-skinned, even prickly, and is inclined to shoot from the hip. His appearances before the Treasury Select Committee have been combative and confrontational. Last year he also berated reporters who dared to question Barclays' remuneration policy, saying they should be "proud" to have a top-tier bank in Britain.

On the plus side, he has proved a formidable builder of businesses. He has grown Barclays Capital, a debt business that rose from the ashes of the failure that was Barclays' original investment-banking venture, BZW (sold to Credit Suisse), into a first-division investment bank. It is the sort of institution Margaret Thatcher hoped would be created in Britain when she de-regulated the City in the 1980s as part of the "big bang".

Ironically, it has taken an American to achieve that ambition. Mr Diamond has done it with a combination of rapid "organic" business growth combined with deals. What clinched Barclays' place in the "premiership" was his skilful negotiation of the purchase of the US assets of Lehman Brothers, following its plunge into bankruptcy on what was the darkest day of the financial crisis. His work is now seen as a triumph, but in the run-up to his crowning glory, Mr Diamond was still ruffling powerful feathers. He originally wanted to buy Lehman before its collapse, only to be thwarted by the then chancellor Alistair Darling's unwillingness to take on its liabilities on behalf of the taxpayer. Mr Diamond couldn't have made his disappointment more obvious. "Couldn't have gone more poorly. Little England," he groused in an email.

But it is not as if it is just the "Little Englander" Brits who have raised the character issue. A US bankruptcy judge who is poring over that purchase criticised Mr Diamond's performance on the witness stand, describing the usually straight-talking banker as "evasive".

It is episodes like this that were, perhaps, behind dealers marking down the shares yesterday. They finished the day down 8.8p at 314p, making the company the fifth biggest faller on the FTSE 100. That could be seen as a tribute to Mr Varley, or as an expression of doubt about Mr Diamond. Few would question his talent but perhaps investors are alive to the dangers to their company that his appointment brings: Mr Diamond has become the lightning rod for critics of the banking industry and "casino capitalism".

The GMB union summed up the feeling of many of the bank's critics when it described the appointment by Barclays as "two fingers up to the taxpayers who rescued them". General secretary Paul Kenny said: "This is about as insulting and divisive as it gets. A person who poured petrol on the flames of the fires in the financial system has been rewarded rather than been punished for what he did. Meanwhile, GMB members are enduring pay freezes and face job cuts to make good the damage Diamond caused. Chancellor Osborne says we are all in this together. Obviously Diamond and the elite do not agree."

Then there is the issue of pay. Mr Diamond will actually be taking a cut in his new role. His basic salary of £1.35m is a substantial increase on the £250,000 Barclays Capital paid him. But the maximum total payment of just over £11m, when bonuses and long-term incentives are factored in, are together much less than what he could have earned in his old job in a good year. The figure will still act as a cattle-prod to critics every time the issue of bankers' pay comes to the fore. Mr Agius said yesterday: "Barclays is extremely fortunate to have had a banker of John [Varley's] quality and is equally fortunate to have an internal successor of Bob's quality to succeed him. Bob Diamond has been an integral part of the transformation of our business. His record is second to none."

Mr Diamond was attempting to play the diplomatic card – up to a point: "I am honoured that the board would choose me for this role and it is extremely motivating and challenging to have the opportunity to be chief executive of Barclays, a 300-year-old institution. It is very, very clear, the importance of banking to the economy and we want to get close to the customer and put the customer first. We are based here in the UK but are running a global integrated universal banking business.

But how long will the diplomacy last. Mr Varley is staying on until 2011 as a "consultant" on regulatory issues. But it will be Mr Diamond in the firing line. Will he be able to stay there without blowing up?