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Make way BarCap – for Lehman Brothers

By Patrick Jenkins

BarCap is dead. Long live Lehman Brothers, writes Patrick Jenkins.

Barclays chief executive Antony Jenkins has deemed the heart of the old Barclays Capital franchise, built by his predecessor Bob Diamond, to be “non-core” – nearly two-thirds of BarCap’s main operation in fixed income, currencies and commodities will be shifted into a new wind-down unit.

But this is not a wholesale disposal of the Lehman legacy. Instead, the Lehman Brothers’ assets that Barclays acquired at the height of the crisis, will become the pillar of a refocused business. The future Barclays investment bank is to be more of a US-centric equities and advisory operation than the powerhouse of FICC that it has been.

Mr Jenkins claims with some justification that his new strategy is a bold one. Investors sent the shares up nearly 8 per cent at one point.

It makes a welcome change for him. Two previous overhaul attempts stuttered. The first, as part of his “Transform” plan, 15 months ago, was not seen as particularly ambitious. There was talk at the time of “surgery, not butchery”. The second, a year ago, ushered in an unpopular co-head management structure, now disbanded. Investors are giving Mr Jenkins a third chance to get it right.

But there is a fine line between “bold” and “risky”. Moving from FICC will tie up less capital and could generate healthier profits. But this will not be easy. Despite the shift to the US-focused Lehman operation, it has been old “Lehmanites” leaving Barclays of late. Inspiring loyalty in a “non-core” banking unit, whose mission is to shrink to nothing, will always be hard. But if your “core” business is also filled with deserters, you may be storing up problems for the future. (FT)

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