Barclays hit back at activist investor Edward Bramson on Thursday, arguing that his appointment to its board of directors would destabilise the bank.
The company conceded that its investment banking unit, which is unpopular with some investors, was still underperforming but insisted that Mr Bramson’s election as a director was “not what Barclays needs right now”.
The lender was responding to a letter sent by Mr Bramson to other investors earlier this week, in which he urged them to vote for him at the company’s annual meeting in May.
In the letter, Mr Bramson warned there was a “real threat” that Barclays would have to raise fresh capital from its shareholders unless it scaled back its trading operations.
Mr Bramson has amassed a 5.5 per cent stake in Barclays — making him the company’s third-largest investor — and has called for the bank to shrink its markets division.
Those demands have put him on a collision course with its chief executive Jes Staley, who has pledged to protect Britain’s last remaining global investment bank from further cuts.
In its response to Mr Bramson’s letter, Barclays admitted that it “does not yet perform at the level at which it should” and singled out poor profitability at its investment banking unit as especially disappointing.
“In particular, the board and management recognise that, whilst improved, the corporate and investment bank does not yet generate adequate returns,” Barclays wrote in its response.
However, Barclays insisted the bank did not need to alter its strategy, as Mr Bramson has suggested, and warned that he “would be a disruptive and uncollaborative influence on the board”.
“He also does not possess the banking experience and skills that we are seeking to add to the board,” Barclays added.
Barclays also said the stake that Mr Bramson has amassed through his Sherborne Investors vehicle was “leveraged” and “time limited”, meaning he was not aligned with other shareholders.
In February, the FT reported that Mr Bramson had funded the majority of his stake with a $1.4bn loan from Bank of America under a complex derivatives arrangement known as a funded equity collar, which effectively limits the potential gains and losses on his shares.
The bank said its incoming chairman, Nigel Higgins, was in the process of overhauling its board and planned to add new directors “with greater banking experience”.
“The election of Mr Bramson would be . . . a significant deterrent to the recruitment of board candidates and destabilising to senior management,” the bank said.
John McFarlane, Barclays’ outgoing chairman, said: “One thing we do have in common with Mr Bramson is that we are well aware that returns from [the investment banking unit] have been below our required level, and we are taking the necessary steps to remedy this.”
He added: “What we do not have in common with Mr Bramson is how this should be progressed, and we believe disruption to the proper functioning of the board is not the way forward.”