Barclays pays a heavy price to become the Brexit bank

Financial insitution is ‘Barclexiting’ from a large number of its businesses and countries, but the price is a high one as its latest results show

Barclays pays steep price for ‘Barclexit’ (Reuters)

Welcome to Barclays. The Brexit bank.

No, this is not some crazily ill conceived ad slogan, nor have I gone mad. It’s a metaphor. Here’s how it works.

Barclays has become the incredible shrinking bank under its American chief executive Jes Staley.

As part of the strategy he’s set it on, it is busily working on “Barclexiting” from territories and businesses that were once core parts of the bank. Europe in particular, where the “blue eagle” under previous bosses had engaged in flag-planting, is now facing withdrawal.

The cost of “Barclexit”, however, is huge. It has cast a real pall over the latest half-yearly results. What the bank likes to call its “core” profit increased by 18.5 per cent to £4bn, although there are various one offs in that number. As ever, you can pick and choose what you include in these headline figures to make them look how you want.

There’s no such messing with the “non-core” losses, however. They dragged the overall tally down by £1.9bn. Group first-half profits fell by 21 per cent in the first half of the year as a result. Ouch!

“Non-core” is made up of the businesses the bank is “Barclexiting”. It has targeted the end of next year for the process to be completed and so it might be just about done by the time the Conservative government triggers Article 50 of the Lisbon Treaty to formally start the Brexit process.

The reason Barclays is paying such a heavy price for “Barclexit” is that these businesses are either being run off or sold off on the cheap. Walking away comes at a price, as Britons will soon start to learn, and a heavy one at that. The forward looking economic data, combined with the losses already reported by UK plc suggest that the scale of that price will make Barclays' non-core losses look like a drop in a very deep ocean.

Post “Barclexit”, Barclays will be a smaller, less outward looking, Transatlantic banking group.

Where the metaphor starts to break down is that Barclays knows this and its board has accepted it. Chief executive Jes Staley has abandoned empire building in favour of making money. He is aware that this means that Barclays will no longer have its once cherished seat at the high table of banking when he’s done. This might cost the bank over the long term as well as the short term. “Barclexit” means surrendering assets such as Barclays Africa, which had the potential to be an engine of growth for Barclays. Its board and shareholders have accepted that.

That’s where the metaphor starts to break down. The British government has not accepted that it will be a smaller, and more modest power post Brexit. By contrast to Mr Staley, it has not tempered its ambitions and it has nothing resembling a logical strategy. One example of this is the nonsensical £15bn purchase of the white elephant that is Trident at a time when the economy is teetering on the brink of a precipice.

There’s another difference between Britain and Barclays too. Despite the retreat he has sounded, Mr Staley seems to have established a rapport with his staff, and certainly a better one than his predecessor “Saint” Antony Jenkins ever had. He enters via the front door, rather than the executive lift. Staff felt like Mr Jenkins spent half of his time apologising for them (to be fair there was some justification for that). Mr Staley has adopted a very different style.

The yacht owning New Englander has shown sings of leadership. He could even be said to have injected a touch of “sunny optimism” into Barclays HQ and he’s made clear that Barclays will do its best to look after the European staff who remain after both Brexit and “Barclexit”. Would that were true of the rest of Britain.

If the bank is shrinking, it is at least doing it with a degree of style. It’s sad that the same thing cannot be said about the unhappy country that Mr Staley has insisted Barclays will continue to call home for the foreseeable future.