PITY the poor banking boss, who can only ever do wrong. Too much profit, too much consumer debt, too much executive pay.
John Varley smiles. “Bankers are not naturally humble people, but I think we have to have the humility to say we are just a means to an end. We are in business to help customers achieve their goals.”
And if, in providing the means to that end, the bankers make a healthy profit, well, so much the better. Varley, chief executive of Barclays and the most articulate of Britain’s banking bosses, has long provided an eloquent defence of his and other banks’ soaring profits, while critics seethe at their perceived indifference to how customers feel.
And last week, when Barclays reported a whopping 37% leap in half-year profits to £3.67 billion, on the back of a buoyant performance by its investment-banking arm, Varley dusted off that speech again.
Strong economies need strong banks, employees need success, the nation needs the tax revenue, pension funds need the dividends, consumers need strong lenders...
But what about the leap in bad debt — more than £1 billion at Barclays so far in 2006? From that, you might think consumers are not particularly well served by the banks’ gung-ho lending.
“Actually, we are very selective about who we lend to. If I look at 2005, we rejected one in every two applications to Barclaycard. That is an example of acting responsibly.”
And those bumper, multi-million-pound pay packages that bank executives now pull in? Varley himself earned £2.8m last year, others on the Barclays board make more.
“It’s a market,” he says, “and we have an obligation to shareholders and customers to employ the best. David Beckham earns a huge amount too.”
You don’t say. Varley nods. He is affably smooth, but a conundrum as well. With his high-cut trousers, stiff-collared shirt, blue braces and monogrammed cufflinks, he looks at times like a man who might not even know who Beckham is.
Yet behind the conservative front, 50-year-old Varley is ruthless and radical. His two years at the top have seen a raft of changes — most notably the exit of several senior executives, and an influx of outsiders into top slots.
More non-Brits now hold key positions, reflecting his determination to make Barclays a more effective, global organisation. Once one of the biggest banks in the world, it is now Britain’s No3 and some way behind the largest globally.
“I don’t care where people come from,” he says. “What I care about is how good they are, because that is what customers care about. The leadership team is a blend, which is what I would expect. I am chief executive and British, and I send a signal thereby.”
The “thereby” is pure Varley. Neat, organised, intellectual, a little lawyerly but not so rigid that he keeps his jacket on, he sits perched on the edge of an armchair, watching with eyes that are a degree cooler than the smile on his still-young face.
Outside, way below the 31st floor of Barclays’ swish skyscraper base in London’s Canary Wharf, the rest of the world gets on with its fraught life. Up here, in the air-conditioned calm, Varley exudes rigorous control.
Some say he lacks charisma and any understanding of the common man. Others counter that his analytical and leadership skills are the bedrock of Barclays’ success.
Both could be true. Varley was head boy at Downside, the Catholic boarding school run by Benedictine monks, and many still detect a whiff of the cleric about him. Like one of those tough cardinals who run the Pope’s finances, he has an aloof composure that disguises the clenched-fist approach beneath.
That can be seen in the way he has driven through change while deftly juggling the competing egos on Barclays’ top team. Bob Diamond, an American, heads the hugely successful investment banking and fund-management side that provides much of Barclays’ profit growth. Frits Seegers, a Dutchman, now heads the retail and commercial side. Deanna Oppenheimer, an American, runs UK retail banking.
David Roberts, a Barclays veteran who headed international retail and commercial banking, is leaving. Roger Davis, the UK banking boss who had been leading a much-touted revival of Barclays’ branches, has gone. Did the revival misfire? “No, Roger did a great job in ensuring that we were outward looking, that we were customer-centric. I am very grateful for what he did. But he wanted to run his own show.”
Behind the change lies Varley’s desire to boost the retail side’s sluggish profit performance. He cites mortgages as a weak spot in recent years. Barclays botched its acquisition of Woolwich — “We were slow to integrate it,” says Varley — but it has performed better abroad, buying into Absa in South Africa and Zaragozano in Spain. Seegers should get more resources to boost its global growth.
Bigger acquisitions? That’s not Varley’s style. So far Barclays has avoided transformational acquisitions because he is wary that they dilute earnings. “But I don’t foreswear it,” he adds quickly, pointing out that at £2.9 billion, Absa was the biggest deal in Barclays’ history. Instead, he has organised the global business to take advantage of future trends, so he doesn’t need transformational deals.
These trends are the so-called “air currents” that Barclays will pick up on: more privatisation of welfare, more wealth management, more demand for banking products in emerging markets, more credit-card use, more demand from corporate customers for American-style debt-raising through the capital markets.
That thought-out approach has characterised Varley’s rise through Barclays. The only son of a Coventry solicitor, he qualified as a lawyer in London before joining Barclays as a merchant banker in 1982. Since then he has worked in every corner of the organisation, recently as finance director, an extraordinary feat for someone with no accounting qualifications.
His strengths are his big brain and prodigious industry. “He does have this fantastic ability to absorb detail, analyse it, and explain it,” says Sir Laurie Magnus, vice-chairman of Lexicon Partners and a friend from university. “He is very hard working, and can put on an austere side, but he’s great company.”
That “austere side” preoccupies a few. For them, his private school and Oxford background leaves him a long way from understanding how mass-market consumers think. His perfectionism and asceticism — he often skips breakfast and lunch — is also unsettling for his executives.
Married with two children, Varley has lived in the same house in London’s Hammersmith for two decades and, while he has built himself a new mansion in Hampshire, he avoids displays of wealth and ego, unlike some of his peers.
He did, for instance, object to this paper’s report on his new home a fortnight ago and made his displeasure known, but he did not cancel this interview. Other bosses would have, but Varley honours his word.
“John does the right thing, not just the clever thing,” says Justin Dowley, founder of Tricorn Partners and another investment-banking friend. “He is always reliable.”
Varley will need that and more as he pushes Barclays to grow faster. It is widely believed that the ambitious Diamond wants Varley’s job, and it is Diamond’s men from the Barclays Capital profit engine that have taken key slots at headquarters. Varley is surrounded. One slip and he could be vulnerable.
But top jobs were ever thus. “There is far more continuity than change here,” says Varley, “but it is only right that we anticipate changes in the environment to make sure we have the appropriate team in place.”
For Barclays’ 120,000 employees, that means revolution remains a daily exercise. For Varley, it’s business as usual, whatever happens.
Vital statistics
Born: April 1, 1956
Marital status: married, with two children
School: Downside, near Bath
University: Oriel College, Oxford
First job: solicitor
Salary package: £2.85m, including bonus
Car: blue Mercedes estate
Homes: Hammersmith and Hampshire
Favourite book: A Christmas Carol, by Charles Dickens
Favourite music: Beethoven’s 5th Symphony, 2nd movement
Favourite film: As Good As It Gets, starring Jack Nicholson
Favourite gadget: Blackberry
Last holiday: Umbria, Italy
John Varley's working day
THE Barclays chief executive wakes at 6am at his home in west London and is picked up by his driver an hour later. John Varley starts work in the car and arrives at Barclays head office in Canary Wharf by 7.45.
“My average day will include a lot of work on the numbers,” says Varley. “I have a big appetite for that.” He has seven top executives reporting directly to him, and sets aside time to meet and greet customers. “I travel one week in four. If I sat in Canary Wharf all day, I would be at real risk of not understanding what customers think.”
He rarely lunches out but often attends evening functions three times a week. He would prefer to see more of his family. “I don’t like eating a lot during the day and one of the pleasures is being at home for supper. I don’t do it often enough.”
Downtime
JOHN VARLEY relaxes by playing Ping-Pong. Defensive backhander or big-smashing forehander? “I suspect I am more defensive,” he says, “although my colleague Paul Idzik is in the forehand camp. He needs more space. We take on all-comers.” Varley does, however, lose to his 11-year-old son. “It’s another source of humility to me.”
Varley also loves to fish, and is never happier than when waist-deep in a river. “The electric current that goes through you when a salmon takes your fly is one of the most exhilarating feelings in life,” he says.
He has recently built a new house in Hampshire — “I have a brilliant project manager in the form of my wife” — where he keeps his Ping-Pong table in the wine cellar.
He buys a lot of wine. “But I am not a collector,” he says, “I am a drinker.”
