Tough Diamond picks up the reins at Barclays

Not everyone is happy with high-street giant's choice of a US investment banker as its new chief

It is a routine process for Barclays' top brass to call and inform No 10 and the Treasury of imminent important announcements. And last Monday evening was no different when such a call was made informing the Government that US investment banker Bob Diamond would take over as group chief executive from John Varley next year.

Yet this was hardly a procedural communication from the British banking institution. Barclays was informing a coalition government, which has vowed to fundamentally reform and reduce risk in the UK banking sector, that its next leader was going to be a banker famed for his penchant for mega, and often high-risk, deals. It would also have told a government immersed in a deep and painful cost-cutting programme that Diamond's base salary and bonus pot was going to be more than that of its outgoing chief executive.

It was a conversation about an appointment that Barclays' chairman, Marcus Agius, has described as a "significant moment even for a bank that has over 300 years of business history". While it has never been a secret that Diamond was the lead internal candidate to replace Varley, confirmation of his appointment ahead of an autumn of heavy consultation on a potential break-up of the big banks is indeed significant.

Rallied by a resurgent return to form this quarter, and heartened by a somewhat softer stance by global regulators on capital rules, banks are unashamedly taking to the forefront of UK business again.

And Barclays is leading the way. It said last week it was an "absolute joy" that Diamond was primed and ready for the job. And in its interim results last month it said it would "consider its options", including relocation, if it was decided that big banks should be broken up. It has also made it clear it will not deviate from its plan to keep its profitable investment banking division at the heart of its "global universal full-service bank" operations.

Coupled with the other news last week that HSBC chairman Stephen Green is to become Trade minister, it appears that the UK banks' spell in credit-crunch purgatory could be well and truly over (See box).

Varley says the decision to appoint Diamond now is simply to ensure an orderly succession. He says: "This organisation will not miss a beat. When I was told I was going to be chief executive seven years ago I had a conversation with the board about what would be a sensible period of office. The understanding I reached was that I would serve until I was 55. I will be 55 next year and we are implementing a timetable that was understood."

Agius says that Diamond, 59, was a "natural choice", and his £1.35m pay, and bonus package, which could be up to £11.5m in 2011, is fair when benchmarked against the "global peer group". He adds: "We are extraordinarily lucky to have an internal candidate of the calibre of Bob. There can be disruptions when the only option is to bring in a chief executive from the outside, and it rarely is a satisfactory situation".

But, for many, Diamond's appointment is a far from satisfactory situation. While No 10 and the Treasury have said the appointment was a matter for shareholders, others were less reserved. The Liberal Democrat Treasury affairs spokesman, Lord Oakeshott, says the appointment shows that "Barclays' board has put two fingers up to the Government".

Vince Cable, the Secretary of State for Business, who advocates splitting banks' investment and retail banking divisions, has said he is averse to the idea of risk-taking investment bankers being placed in charge of managing the deposits of UK households. He said Diamond's appointment strengthened his argument for the Government looking at the structure of banks.

Diamond's appointment may appear to be laying the path for an investment-led growth at the expense of Barclays' less profitable retail division, but Diamond is having none of it. He says has been responsible for a huge chunk of the Barclay business, and not just investment banking, for some time working as a double act with Varley. He has been a member of the executive board for 13 years, while heading Barclays Corporate and the investment banking arm Barclays Capital, which generated almost 90 per cent of the bank's £3.9bn first-half pre-tax profits. He led the integration following the purchase of part of the collapsed Lehman Brothers operations, and he is on the board of Barclay Global Investors. Diamond is also involved in the "Gamma" plan to quadruple the size of wealth management business Barclays Wealth.

"In terms of [my] investment banking background, it is clearly there, but... there is no space between John and Marcus and I on the strategic direction of Barclays. I have been very clear on the importance of banking to the economy and the importance of the Barclays Group and [the importance] of putting customers and clients at the centre of everything we do."

This is a view strengthened by some banking analysts, which say Barclays' retail arm is undervalued. Morgan Stanley, in a research note last week, said: "We think recovery in Barclays' corporate and retail bank is undervalued, and see upside in the stock.... We see UK retail banking as the most valuable part of Barclays Global Retail Banking [business]. We are encouraged by the progress seen in share gains in the mortgage market".

The Barclays triumvirate was keen in a conference call last week not only to stress the value of its high-street operations but also to note that the appointment of an investment banker was not a shot across the bows of the commission that will consider whether banks should be broken up.

"The [Future of] Banking Commission is an important thing," says Agius. "It is something we should be respectful of and we look forward to engaging with them." Varley said: "It would be disrespectful of us to anticipate what the Commission will decide, and even the Commission itself has not even decided what it will decide. We have opinions, of course, as we have run this business for a long time."

None would be drawn on whether a veiled threat to relocate if the UK regulatory regime became too onerous was real, but said that any relocation assessment was simply further evidence of responsible management. "We feel our natural HQ is here in the UK," says Varley, who will stay on as a senior adviser on regulatory matters until September 2011. "But we have to consider [our 'what if' options] – it would be irresponsible as a board not to."

For Diamond, the prospect of running the show and tangling with a host of politicians who deem him to be one of the most egregious examples of banking excess, is not daunting. "It is a combination of being tremendously honoured, motivated and challenged," he says. "It's tremendous that we have as big and important a business in the US as we have. The big issue is we are located here in the UK, and our HQ is here, but we run a global, integrated bank and have offices in 60 countries."

Despite a small share-price fall, shareholders and clients seem to have taken the news of Diamond's appointment well, and this is a view that resonates with Varley, who says: "When we look at what we have been through – at the extraordinary events of the last year – we have done quite well. We are strong, we are independent. This is a good time for me to hand over the reins."

God and Mammon: HSBC's Green reconciles faith and capitalism to take Trade post

Stephen Green has very publicly wrestled with this famous conundrum from Luke's Gospel: "No servant can serve two masters.... Ye cannot serve God and Mammon."

Well, Green, who will become Trade and Investment minister in January, has given it a damned good try. The outgoing HSBC chairman even wrote a book in the 1990s entitled Serving God? Serving Mammon? where he uses scripture to defend his position in the heart of capitalist society.

Green rarely gives interviews, but his devoutness – he is an Anglican lay preacher – meant that Church Times was able to snaffle an audience with him during the heart of the recession last year. One statement was particularly revealing: "There are a lot of lessons to be learned, but I passionately believe well-run banks are crucial to modern life. We kid ourselves that there is some superior virtue in working for not-for-profit agencies."

Workers at Christian Aid might disagree with that, but Green sees wealth as no obstacle to following religious principles as long as the money is put to worthy use.

His role as Trade minister will be unpaid and he will leave HSBC – after nearly three decades, including a stint as chief executive – at the end of the year. For Green, 61, this represents something of a homecoming. Shortly after earning his masters from the Massachusetts Institute of Technology – following a BA at Exeter College, Oxford – he became a civil servant in the Ministry of Overseas Development. And now he will promote the UK's international interests.

The coalition searched hard for their man, with reports suggesting that many potential appointees felt the role was a poisoned chalice. But, for Green, it was a chance to do some good, building relations with some of the world's fastest-growing nations. In a statement last week, he said: "It is an honour to accept this new role... serving Britain in the vital areas of trade and investment."

So that's three masters: God, City, country. Financiers will be keen to see in what order he serves them. Maybe that's a subject for Green's next evangelical work.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
Sport
Dave Mackay lifts the FA Cup in 1967 having skippered Spurs to victory
football
Life and Style
Marie had fake ID, in the name of Johanna Koch, after she evaded capture by the Nazis in wartime Berlin
historyOne woman's secret life as a Jew in wartime Berlin
News
Jihadi John
newsMonikers like 'Jihadi John' make the grim sound glamorous
Arts and Entertainment
As depicted in Disney's Robin Hood, King John was cowardly, cruel, avaricious and incompetent
film
Life and Style
Travis Kalanick, the co-founder of Uber, is now worth $5.3bn
tech
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Recruitment Genius: Customer Service Advisor

£15000 - £16000 per annum: Recruitment Genius: A Customer Service Advisor is r...

Ashdown Group: Trainee Consultant - Surrey / South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

SThree: HR Benefits Manager

£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...

Day In a Page

Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

Climate change key in Syrian conflict

And it will trigger more war in future
How I outwitted the Gestapo

How I outwitted the Gestapo

My life as a Jew in wartime Berlin
The nation's favourite animal revealed

The nation's favourite animal revealed

Women like cuddly creatures whilst men like creepy-crawlies
Is this the way to get young people to vote?

Getting young people to vote

From #VOTESELFISH to Bite the Ballot
Poldark star Heida Reed: 'I don't think a single bodice gets ripped'

Poldark star Heida Reed

'I don't think a single bodice gets ripped'
The difference between America and Israel? There isn’t one

The difference between America and Israel? There isn’t one

Netanyahu knows he can get away with anything in America, says Robert Fisk
Families clubbing together to build their own affordable accommodation

Do It Yourself approach to securing a new house

Community land trusts marking a new trend for taking the initiative away from developers
Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

Money, corruption and drugs

The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

150 years after it was outlawed...

... America's first slavery museum is established in Louisiana
Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all
Tony Oursler on exploring our uneasy relationship with technology with his new show

You won't believe your eyes

Tony Oursler's new show explores our uneasy relationship with technology. He's one of a growing number of artists with that preoccupation
Ian Herbert: Peter Moores must go. He should never have been brought back to fail again

Moores must go. He should never have been brought back to fail again

The England coach leaves players to find solutions - which makes you wonder where he adds value, says Ian Herbert
War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

The battle for Mosul will unleash 'a million refugees'

Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn