Wealth Manager - the site for professional investment managers

Register to get unlimited access to Citywire’s fund manager database. Registration is free and only takes a minute.

Bailey on Barclays: exactly why we avoid highly politicised banks

Bailey on Barclays: exactly why we avoid highly politicised banks

Liontrust’s Stephen Bailey (pictured) believes Barclays’ record fine shows how banks have become too entwined in politics and represent a bad investment.

The manager of the Liontrust Macro UK Growth fund and the Citywire Selection Liontrust Equity Income fund completely sold out of banks in 2007, although he briefly held Barclays and HSBC in 2010.

‘We don’t hold banks – we feel banks have become so politicised,’ he said. ‘Since the financial crisis and bail-outs with Lloyds and RBS, there has been a popular movement in banker-bashing,' Bailey told Wealth Manager

‘You’ve seen Stephen Hester mentioned with excessive pay packages, and Bob Diamond is a popular target given his big bonuses. Now there’s a popular cry to make someone accountable for what’s happened.’

Bailey said if Diamond was removed from Barclays, it would hit shareholders in the short-term.

‘If he was removed it would be damaging for the company,’ said Bailey. ‘He has built up a good reputation, which may have been tarnished with corporate excesses, but he has done a good job.

Earlier today prime minister David Cameron and chancellor George Osborne said Diamond had some serious questions to answer, while Labour politicians demanded the bank’s management team face a criminal enquiry.

However, Bailey said: ‘It’s not up to politicians to remove Diamond; it’s up to the shareholders.’

He added that it is perhaps of greater concern that Barclays' internal controls are not as rigid as they should have been.

‘So one of the reasons not to own banks is the highly politicised nature of the banking industry,’ said Bailey. ‘There is also the lack of clarity over loan books. And we don’t see the economy ultimately improving in the short-term. So banks represent a poor investment case.’

Yesterday UK and US regulators hit Barclays with a £290 million fine, for significant failings in relation to Libor and Euribor, seeking to influence the rate submissions of other banks among other actions.

Diamond said he would forgo this year’s bonus as a result. Barclays share price was down as much as 18% at one point today.They have since recovered some ground to stand 14.4% lower. 

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.
Citywire TV
Play On the Road Challenge: Clay pigeon shooting with Thesis' Lansdowne

On the Road Challenge: Clay pigeon shooting with Thesis' Lansdowne

Eleanor Mahmoud goes clay shooting at the National Clay Shooting Centre with Sam Lansdowne from Thesis Asset Management

Play AA-rated Flood on gov't bonds: 'the maths doesn't add up'

AA-rated Flood on gov't bonds: 'the maths doesn't add up'

He also addresses why his Newton Multi-Asset Income fund has such a high cash weighting and why he sees renewables as such a good opportunity.

Play AAA-rated Ali: Identifying the peripheral European plays

AAA-rated Ali: Identifying the peripheral European plays

Citywire AAA-rated Tawhid Ali thinks that plenty of good stocks in the European periphery are being thrown out with the proverbial bath water.

Read More
Your Business: Cover Star Club

Profile: Brewin's Cardiff boss on the Welsh opportunity

Profile: Brewin's Cardiff boss on the Welsh opportunity

Prior to becoming head of Brewin Dolphin Cardiff, Welshman David Myrddin-Evans had only previously visited the city to watch the rugby.

Wealth Manager on Twitter