In a surprising move,Barclays(LSE: BARC) (NYSE: BCS.US) announced this morning that it has firedchief executiveAntony Jenkins, after only three years at the helm.
It turns out that Jenkins had lost theconfidence of the groups non-executive directors. The decision to oust him was made on the sidelines of anannual off-site board meeting two weeks ago.
Jenkins is being replaced byJohn McFarlane on an interim basis.
Accelerate the pace of execution
According to Barclays, todays leadership change does not signal any major strategy change. MrMcFarlanes appointment is simply designed to accelerate the pace of execution.Indeed, John McFarlane has a reputation as a ruthless turnaround specialist.
Commenting on the management overhaul, Sir Michael Rake, Barclays deputy chairman said:
it became clear to all of us that a new set of skillswererequired for the period ahead.
In another statement Barclays said:
new leadership is required to accelerate the pace of execution
Analysts are already starting to speculate that an accelerated cost-cutting programme is now on the cards for Barclays. Further job losses are likely and non-core divisions, like Barclays investment bank andWestern European retail businesses, could also be on the chopping block.
MrJenkins has struggled to get to grips with Barclays investment bank which has become the groups worst performing division during his short term as the banks CEO.
Good news
Barclays shares have jumped by 3.2% in early trade this morning, so it seems as if the market supports the banks decision to kick Mr Jenkins out.
And there are plenty of reasons to be upbeat. Indeed, whileMrJenkins recently declared that the bank was in its best shape since the financial crisis, theres still plenty of work for the group to do before it returns to growth.
For example, theres still a considerable amount of drag on Barclays earnings from the groups non-core business. Unnecessarybureaucracy is also eating into returns according to analysts.
Tackling key issues
It is believed thatMrMcFarlane will now look to tackle these issues head on. An enlarged cost-cutting programme is on the cards and analystsexpect the bank to announce a further restructuring of its investment bank.
Barclays used to generate the majority of its profits from its investment bank. But now, the division has becomeweighed down by regulation and slower market activity.
The investment banks return on equity a key measure of profitability dropped to only 2.9% last year. In comparison, Barclays personal and corporate banking arm reported a return on equity of 11.9% for full-year 2014.
Moreover, Barclays growth is being held back by the groups bad bank. Simply put, a bad bank isthe equivalent of a financial dustbin and contains all the risky loans and toxic financial products that Barclays wants to dispose of.
Barclays is in the process of winding down its bad bank, but the process is taking time. With a new CEO, it is believed that the process of selling off toxic assets will be accelerated.
The bottom line
Overall, Barclays decision to fireAntony Jenkins was made in an attempt to speed up the banks restructuringand recovery.
Only time will tell if this was the right decision. However, the markets initialreaction suggests that investors fully support the move.
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Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has recommended Barclays. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.