Did last week’s Barclays reshuffle, which saw ex-Lehman rainmaker Skip McGee promoted to a new position as chief executive of Barclays in the Americas, serve partly to placate US bankers at the businesses Barclays bought from Lehman in 2008? Yes, according to one senior banking analyst who’s worked at both banks.
Chris Wheeler, a director at Mediobanca in London and former executive director at Lehman Brothers and ex-head of investor relations at Barclays, said Barclays is struggling to tame the culture at its former Lehman business in the US. “The mentality at those Lehman businesses is that they think they did Barclays a favour – they’re not changing. And they’re pushing back on Barclays’ efforts to reduce their pay.”
The US bankers at Barclays are gaining leverage from the fact that US investment banking profits are growing while European investment banking profits are dwindling, said Wheeler. A recent banking report from Morgan Stanley and Oliver Wyman said that America has become the all-important driver for investment banks’ profitability. Barclays’ US strength comes from the Lehman assets and people it bought in 2008. The ex-Lehman US business is being further strengthened within Barclays by the pound’s depreciation against the dollar since the beginning of the year, said Ian Gordon, head of banks research at Evolution Securities.
Barclays declined to comment. However, Brad Hintz, an ex-Lehman CFO and analyst at Bernstein Research, said tension within Barclays resembles the experience of all European banks on Wall Street. “There’s social pressure in the UK and Europe to reduce pay for bankers. That pressure doesn’t exist in the US, which leaves European banks on Wall Street with a managerial problem – how can they pay one group of people in London or Europe at one level and another group of people in the US at a different level altogether?”
McGee’s promotion may be one way of making ex-Lehman bankers feel loved so that they accept lower pay and cultural change. Hintz offered an alternative suggestion: “There’s a consultant named Bobby Diamond who’s probably available and is great at using a whip and a chair to bring traders and investment bankers under control.”