Barclays under fire on climate

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Welcome to banking weekly from the Financial Times with me. Patrick Jenkins joining me in the the students today is David Crowe. Our banking editor. We are joined down the line from Tokyo by Robin harding. Bureau chief that and also from New York by Laura renewed. US banking editor a guest. This week is Christian Wilson from share action the invested this week. We'll be taking a look. Look at Barclays as it comes under fire for its environmental record from Cher action an investor group. I look at Japan as its regional. Thanks get overhauled and finally from Laura in New York a report on a clutch of results I o to Barclays and David. You wrote an interesting story. With our investment correspondent the other day at backed Barclays coming under attack from share action over its record on financing fossil fuels. What exactly has been said? So Barclays like many other banks is under pressure to stop financing coal whole fire power plants and that sort of thing and in this instance there's eleven institutional investors together they manage collectively hundred thirty billion pounds. There are some big names in there as well as some small individual shareholders this we're told is the first resolution of its kind in Europe and puts puts Barclays in a tricky spot. Because they like everybody else. Talk a good game when it comes to green finance and sort of signing up to the various initiatives initiatives but actually putting money where their mouth is and changing. The profile of lending doesn't seem to be happening. Well let me bring in our guest now. Christine and Wilson who is a senior researcher at Chair Action Christian. Thanks very much for being with us. Tell us why have you gone after Barclay's like this to the reason we've chosen vaucluse as a fault. He's really is a global PLA- when it comes to fossil fuel financing that's in the top ten globally. It's number one in Europe and we think just an absolute times from investor perspective. It makes sense really focus in on bought tastes because that's such a big play in the space when we think about Balkanise balkanise never investment bank. Of course it's very much split between Europe and America but actually when we look we compare that policy against the major the US investment banks the investment banks that financed even more than boggs. These days maltesers actually not had related to them in terms of the progressiveness of policy. Let's see when we combine them to Europe. Welcome he's really number. One in terms of financing then fall behind some of that and so we think this is no community football case leadership in America. I'm really catch up with its European. His when it comes to fossil fuel financing. So what would you like to see them. Do you like to see them. MM stop lending to coal companies to oil companies altogether because that would be quite dramatic shift. Obviously what the resolution and split the kiosk is all spoke to align activities in the energy and utilities sector with the Paris Agreement. And you just yes. It does quite a radical loss but actually when you look at the pace of Balkan and some of the largest investors in the world. They already committing to do this. I'm from all points of view. You share action billion investors who followed this with us. What we're saying is that you'll pisses during this ball because we think this is a gap in your strategy and we would like you to as a clear plan to fill that gap so the question is what does that mean in practice what it means to adjust energy lending failure with the science joins all the time and that does not mean from day one they connote onto finance an energy company? A tool what it means is a clear timeline. Overtime phase out sever example impo if we look at best practice in the sex at the moment some banks to saying we will no longer finance. Companies Reliance on coal by twenty twenty twenty five life and then also thinking about those extreme fossil fuels and so low. It may seem like a big step forward. This is actually being committed to a lot of banks in the space already. We all kind of much commitment put into practice other any big banks that you would highlight is doing much better because there are obviously some smaller niche players that make a virtue of being Carina but other genuine. He's doing better on this. Yeah they're all they're all so would you highlight loss. Yeah we saw. The principal was responsible. Banking being launched and that was forty seven trillion of assets being presented by the banking sector. I bought please was one of the founding signatories of those principles. Then just all start. We have a commitment being launched so we'd thirteen trillion times publicly committing to align the lending profiler is with the prosecution so essentially essentially exactly what well resolution I'm not included socgen include. MP included stunned unsheltered Credit Agricole and Santander so the biggest it gets European banks in this space apart from boggs as on the UK banks when we look at the individual policy level. Somebody's banks example. Credit Agricole is committing to phase. He's out cold by twenty five in Europe. Twenty four outside of Europe and twenty fifty and the rest of the world in China. And so that's really practice at the moment we're seeing and there's no reason to Buckley's mashed and that's what we're really hoping they do. It's not so much talk but we think great oaks unity provoke these just to show leadership to its customers onto it. Showers distresses his plays out. But it's a gradual phase out. This is not going to be an abrupt stop financing tomorrow. We just need a strong policy in place to make sure about his loins. Persson's let me come back to David for a final word on this. Firstly you agree with those points. Is this a reasonable request request that is deliverable even if these wanted to do it. And secondly is it going to go through shareholder vote you think. Well I think these other banks should it is deliverable in phased raised manner and so you work with clients. Every period of in some cases up two decades to try to get them to change their business models and if they haven't done it by the end of that period but then you on bank them and somebody takes that business I think the problem for Barclays that list of the banks that had agreed to line their portfolios folios with the Paris climate agreement. The one thing that they all share is the fact that they don't have a big presence on Wall Street and Barclays does and so people inside bank say that that means they are naturally more exposed to fossil fuels and so on but the other big problem putting this in context of what's going on at Barclays Aweys is that Corporate Investment Bank is under attack from an activist at Bramson has been for over a year now and they. They really feel that. They can't sacrifice any revenue at the moment because they need to show that this unit is worth keeping in its current form while it's going to be a fascinating S. nineteen story to see it play at the Sheldon meeting. Thank you very much for joining US Christine from Cher action. But let's move on now to a second topic and a look at the Japanese banking sector joined by Robin Harding Tokyo Bureau Chief Robin. Thanks for joining us. It's it's an interesting bit of news. That basically Japan's top regulator has come up with a pretty drastic plan to shake up the regional lenders in Japan. which have been through a pretty torrid time? Thanks to the ultra low interest rate environment and generally low growth in the domestic market. Tell tell us more so it's really interesting. This was an interview with the F.. T. and the chief of the Financial Services Agency pushy pushy. He Day Endo ran through was really quite a huge programme of reform of Japanese regional banks. He's been laying out over the last few months so the regional banks have real problems very well known as a declining population in Japan and that affects regional Japan by struggle so the banks have a huge problem in that the the loan demand for them they have huge deposits from the increase in elderly populations in the regions but not lend themselves well. They used to was by Japanese government bonds which yielded cheap sense but because of the Bank of Japan's best interest rates. They no longer do. So if you spank Sabine suffering comically low lower profitability the FA is basically decided is A. There's no way out of this and they're not going to sit there and regulate the loan books but instead they're going to try and push the banks to completely change that business models and the kind of thing that's being suggested is that you know you regional banks you'll the only people in your region who know anything much about finance. So the idea is that the regional banks I actually had volleys companies on how they should grow. What might be a Newell Corporation whether they sell brewed and even that they could be on that and become management consultancies to these companies or even actual trading in companies buying the product or regional companies and setting them on to customers? And when you think about that's amazing Khoza Bank is that is really quite a big departure departure and so this program the FSI is rolling out has the potential to reshape. The Japanese regional banking system quite significantly a final thought. Thought from you. Obviously Japan is kind of Petrie dish for the financial experiment that we're seeing much of the rest of the world now that Japan was basically the head of the curve. Not necessarily a good way but other lessons here for European banks in particular that are finding it very difficult to you make money in a ultra low interest rate world. Japanese banks haven't pulled off this trick yet of transforming business models low. I think there is a lesson in what the Jeff Essay has discovered because for twenty years after Japan's banking crisis in the Nineteen Ninety S. They basically responded by being extremely strict regulators and just being by the book on what the Regional Banks able sled those fine as far as it went. What is done is perpetuate this problems? They have no sustainable business model and they way of making money so if this new experiment this attempt to change the business model is successful. I think it will provide a really interesting model for others. In Europe and elsewhere follow in the future we shall what closely rubbing thanks very much for joining my pleasure. Let's move onto a third and final topic for the day and a look at the. US Bank results. So Laura we've had a tree of banks reporting on Tuesday. JP Morgan Citigroup and Wells Fargo Citi Group and JP both look pretty good yes. They said he briefed. Mergen both put in gray quarters. If we look at J.P Morgan Chase I. They have their strongest ever profit in dollar terms. The really remarkable thing is they return on equity is now actually ties level in ten years. But it's closing in on pre-crisis levels and that's really remark. What you think that this is the buying which now about one hundred billion more equity than it did ten years ago and yet they're able to get the return on equity close is to levels seeing pre-crisis sick also had a pretty good quarter of and a pretty good into the year and that was lifted by the same things? I lifted J. P. Morgan Chase. Because they can businesses are still strong for both of them and then we also saw though the strong rebounds in markets earnings in the fourth quarter everyone expected markets to be strong. They is in Christ and to be as strong as they were. So in the case of J. P. Morgan trading revenues rose fifty six percent in the fourth quarter versus a year earlier. The buying had guide us. I thought is would be meeting. But people didn't think that by meaningfully. They meant more than fifty percents when the case of city as well also showed a big jump just out of interest lower the J.. AP Morgan Return on equity number. You mentioned getting close to pre-crisis levels. Well actually was the number for two thousand nineteen so if we look at it on the basis of return on tangible J. Taping Morgan tasted nineteen percent twenty nineteen. That's behind level. We saw since two thousand seven when they did twenty two percents they had twenty four percent. Intestments six so they really have mine she get return to shareholders. Back right off there again. Even though they're not holding so much more equity than they previously just so j. p. t. both riding a high at least for the time being wells Fargo is the third companies ripple on Tuesday a very different story there Yeah Wells Fargo just continues Tangier to show signs of this scandal. They really have managed to stay off so basically bathing suffering for years. Now they have a new chief executive. They've put through a lot of costs in the fourth quarter and they managed to miss on pretty much everything I mean. They missed on the revenues by a pretty narrow of mind but they also missed on earnings by quite abyss. non-interest noninterest expenses were high litigation. Costs were high. So the new chief executive char-e-sharif he's basically saying that he has to come in and make fundamental changes on the there are clearly the opportunities to improve the banks perform on the anybody would debate. Fash so I guess what we see here is a new chief executive coming in is often element of Seo wanting to kitchen sink think or at the bad charges in their first quarter on. Then that Kinda cares the DAX for him to try to show progress and going forward Charlie Schaaf of couse. JP JP Morgan alumnus. So they must be hoping that some of that. Jp Magic rubs off on them. We'll keep an eye. Thanks for that. Laura that's all for this week. Thank you very much to David. Crow Robin Harding. And Laura Newnan. And I'll get this week. Christine Wilson from Cher action. Thank you for listening. Remember you can keep up to date with the latest spanking stories at after dot com slash banking banking weekly was produced by Simon until next week bye

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