Margareta Pagano: Will Barclays become the Diamond Bank?

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The Independent Online

Thousands of words have been written about the elevation of Bob Diamond to the top job at Barclays last week, ranging from the sublime to the ridiculous – but I'm not sure any of us are any wiser about its real significance, either to the future of the bank or, indeed, the future of the banking industry.

So far, most of the politicians and commentators who have been huffing and puffing about Diamond's "inflammatory" promotion have interpreted it as Barclays putting two fingers up to the Coalition, as well as to the banking commission investigating the future of the industry. They suggest that by crowning Diamond, Barclays chairman Marcus Agius and his directors are, in effect, warning the Coalition not to even think about breaking up the banks, because if it does, Barclays will up sticks with Diamond, taking their juicy tax revenues back to New York or wherever. Others claimed the appointment showed Barclays is so confident that the Coalition won't break up the banks, that it's going ahead regardless.

Both views are off-beam and, as usual, the truth is much more intriguing. First, Barclays had to give Diamond the top jewel because the bank today is his creation. At 59, if he hadn't been given the job, he would have walked, taking his many loyal lieutenants with him. Secondly, however smart the Barclays board is, it can't know what the banking commission will come up with when it reports next year. While it is true to say the political will for splitting banks' retail and investment arms is fading, it's still possible the commission chairman, Sir John Vickers, will recommend such a radical route, or at least some sort of legal ring-fencing.

And here's the real irony; splitting up Barclays could be exactly what Diamond wants to do anyway, so he can create a pure-play investment bank, possibly even listing it in the US. The American baseball fanatic will soon be running one of the world's leading universal banks, but it's only worth around £36bn on a price-earnings multiple of around eight – measly compared with its competitors. With so much stock paid out to staff, that must be annoying.

Mediobanca's banking guru, Christopher Wheeler, reckons Barclays is one of the most under-rated banking stocks in the world, and that by hiving off the retail business, the market cap could shoot up to around £43bn. He puts a valuation on the high-street branches of around £7bn, giving Barclays the cash to expand elsewhere. Wheeler, who has a target price for Barclays of 399p compared with Friday's 319p, believes Diamond is keen to expand the business in the US – into either retail or wealth management, where the bank is already investing heavily in "Project Gamma", to quadruple the size of its US Barclays Wealth business, acquired with Lehmans.

One business which might tempt Diamond, which is already being looked over by JP Morgan's Jamie Dimon, is Paine Webber, now owned by UBS, which could really give him a push into high net worth US retail market. There's a lot more for Diamond to question – is Barclays the right home for Barclaycard? Should it sell its South African bank stake? Now Diamond has the ultimate power, though, there will be deals – that's what keeps red-blooded investment bankers ticking. They may be the right deals but Agius will have to watch him carefully – mentioning the close call over ABN Amro may do the trick.

Green will be a superb ambassador for the UK, but who will fill his shoes at HSBC?

By contrast, the appointment of Stephen Green as the Coalition's new trade tsar has been as smooth as manna from heaven. Although the HSBC chairman took his holiday to make up his mind whether to take up the role, when he did decide it was quick and with enthusiasm. It must have come as a minor miracle for David Cameron, who has been struggling to fill the Trade minister vacancy for months.

It was worth the wait. Green should be a superb ambassador for the UK as he has the right business credentials to be an international statesman but also, and perhaps more importantly, the appropriate character; he knows himself and doesn't seem to have much to prove – vital in high-profile public life.

While "doing God" can be dangerous for politicians and businessmen, there's no doubt that Green's Christian principles inspire him; when he says boosting trade helps alleviate poverty, you know he means it. His experience of Asia will also help the coalition forge its new foreign policy, which is to engage far more with emerging nations. There's an added bonus – Green will join a new sub-committee which will be reporting to the new banking commission, and while he is bound to be against splitting up the banks, he will at least push the arguments through more thoughtfully than most.

But Green's departure leaves an interesting conundrum at HSBC, and maybe musical chairs at other companies. The search is on for a new full-time executive chairman – two HSBC non-executives, Sir Simon Robertson and John Thornton, are leading contenders, although Robertson is chairman of Rolls-Royce and couldn't do both jobs. But the Rolls chief executive, Sir John Rose, is known to want to step up to chairman. Maybe he could move up to the Rolls chair while Robertson, a former investment banker, could switch full-time to HSBC? Just an idea.

Brave banker: King prepares to address 'raucous' union conference

The Governor of the Bank of England, Mervyn King, will need to be even sharper than usual when on Wednesday he becomes only the second central banker to address the TUC conference, set to be one of the most raucous for years. It's going to be fascinating, as King supported George Osborne's decision to go for big and early cuts, playing a key role in stitching together the coalition by persuading Nick Clegg that spending cuts are vital. But he's also on the side of the angels – and the unions – criticising the City's high-rolling bankers and their role in the crash. King has a close ally in Brendan Barber, the TUC boss, who is also on the Bank's court and who recently told me he's a big fan of the Governor – a "great man of integrity". Could the king-maker be taking on the role of peace-maker as the unions gear up for a winter of discontent?