Sir David Walker Inspires Confidence in Barclays Investors

PUBLISHED: 10 Aug 2012 @ 22:03 | Comments (0) | More info about Lou Gutheil

Barclays (LSE:BARC) can’t seem to stay out of the news, but some days that’s not all bad. Last evening, 09 August, the bank announced that Sir David Walker had accepted its invitation to take over as chairman of the troubled institution. A positive reaction from investors was indicated by a 3.32% increase in the bank’s share price from 178.95 to 184.90.

Walker’s Resume

Sir David started as a civil servant in the Treasury upon his graduation from Queen’s College, Cambridge in 1961 at the age of 22. He later moved to Washington as a staff member of the International Monetary Fund. He subsequently returned to London where he served as assistant secretary at the Treasury. In 1977 he joined the Bank of England as chief advisor. He served a short term as chairman of Johnson Matthey, guiding them through the financial crisis of that era. From 1986 to 1992 he was chairman of NatWest Financial Markets Group, moving on to become deputy chairman of Lloyds Bank Plc. He joined Morgan Stanley in 1995 where he continues to serve as a senior financial advisor.

He was the chairman of the Securities & Investment Board, now known as the Financial Services Authority, from 1988 to 1992. He has served as chairman of the financial markets steering group at the London Stock Exchange, as vice-chairman of Legal & General, and held non-executive positions at Reuters and National Power. He was joint-chairman of the FSA-ordered review of the Bank of Scotland’s fall from grace. He is known to be an advocate of delayed bonuses, which Barclays has already announced as being under consideration as part of their restructuring.

Walker’s Responsibilities

Sir David will join Barclays as a non-executive director on September 1^st and will step into the chairman’s position on November 1^st. For a salary of £750,000, £100,000 of which will be in bank shares, he will be expected to work “no less than four days per week”. In a brilliant move, given the circumstances, he will not be eligible for any bonuses. He has said that his first priority will be to find a new CEO to replace Bob Diamond. One observer noted that the bank was wise to find a chairman first, as a new CEO will want to know for whom he will be working. His three-year contract calls for him to lead the banks’ recovery efforts through changing the culture, cutting costs, and securing a CEO who is capable of implementing radical change.

Walker’s Reviews

On the negative side, several analysts and shareholders have questioned hiring someone over 70 years old. That’s about it on the negative side. Special note: None of those critics are close to being 70.

On the positive side, his appointment has been lauded with comments like:

“His strong regulatory background and preference towards longer deferral of bonuses will be a positive in terms of lowering the cost of equity and improving returns for shareholders.”

“This is the beginning of the end of the period of uncertainty for the board.”

“This appointment is another positive step in the right direction for the company as it continues its fight back from the aftermath of the Libor scandal.”

“Leading a review into corporate governance will tick a big box, and he’s an investment banker, so he has that knowledge and he’s ex-Bank of England, so they’ll be happy with him. Given the governance and Bank of England angle it’s as sensible an appointment as you’re going to get.”

Walker’s Remarks

In a comment on Thursday evening, Sir David said, “I am looking forward to joining the Barclays boards and to playing my part in taking the company forward after recent events. The UK needs a strong financial services sector and Barclays has a crucial role to play in ensuring that this country has a successful, well-governed banking industry. My immediate priority, and critical to Barclays ongoing success, will be the appointment of a new chief executive and I will be fully engaged in that process”

For Barclays it looks like things are improving. It’s hard to imagine that they could get worse.

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