Barclays PLC (LON:BARC) has confirmed the appointment of Rothschild veteran Nigel Higgins as chairman to replace John McFarlane amid pressure from an activist investor to improve its financial performance.
Higgins, who is deputy chairman of Rothschlid & Co., will join the board on 1 March 2019 and take over as chairman when McFarlane steps down after the bank’s annual general meeting on 2 May 2019.
READ: Activist Ed Bramson calls for Barclays chairman John McFarlane to step down
The appointment was expected with Sky News saying on Thursday that Barclays had lined up Higgins as its next chairman.
In August, activist investor Sherborne Investors said it was in talks with Barclays over finding a new chairman.
Sherborne, which is led by Edward Bramson and has built a 5.4% stake in Barclays, said they were also discussing the lender’s quality of earnings, capital adequacy, cost structure and capital allocation.
The activist investor has also previously told investors it wants Barclays to scale back the investment bank to boost returns for shareholders.
Bramson is known for his cut-throat approach to companies he holds stakes in, having ousted the chairman of fund manager F&C and put himself in charge.
McFarlane says it was 'difficult choice to retire'
McFarlane said in the bank’s Friday announcement of his departure: “Whilst it is always a difficult choice to retire from a company as prestigious as Barclays, I am delighted that the board has appointed Nigel Higgins to succeed me as chairman.
“I have every confidence that Nigel will be a superb steward of the board and the bank as Barclays continues to progress following the substantial restructuring of the past few years, and I look forward to welcoming him when he joins our ranks in March."
He had told shareholders at the bank’s annual meeting in May that he had asked the chairman of its nominations committee, Crawford Gillies, to prepare for his eventual departure but added: “You are not getting rid of me yet”.
Gillies said Higgins was the ideal candidate as a “hugely respected banker, a strategic thinker, someone with extensive international experience, and he has a strong positive leadership style”.
McFarlane fails to deliver on promise to double share price
In 2015 when McFarlane joined Barclays he had vowed to double the bank's share price in three years. At that time the shares were trading at around 260p but are now sitting at around 178p, up 1.4% on Thursday's closing price following the news of McFarlane's departure.
"In this regard, Mr McFarlane’s tenure to date has therefore been a miserable failure," analysts at Liberum said.
"However, operationally there has been reasonable progress, with a significant strengthening of the capital position and improvement in profitability, although the latter is not yet enough to push annual returns sustainably above the cost of equity."
Liberum kept its 'buy' rating on Barclays, saying it continues to view the shares as being materially undervalued. The broker said it gives "no credence" to the management team’s ability to improve the bank's financial performance and achieve its target of delivering a return on tangible equity of more than 10% by 2020.
"If this can be delivered then we think the shares could easily re-rate towards tangible book value (last reported at 260p as at 30th September 2018), with our current fair value struck at 245p (39% upside)," it said.