British bank Barclays PLC is close to naming former JPMorgan Chase (NYSE:JPM) banker Jes Staley as chief executive, signaling a renewed focus on an investment banking division that has been pared back over the past three years.
Barclays offered the position to Staley, currently managing partner of U.S. hedge fund firm BlueMountain Capital Management, and he accepted the offer, a person with knowledge of the situation told Reuters.
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Boston-born James 'Jes' Staley, 58, ran JPMorgan's investment bank and asset management business and had been at the bank for 34 years before leaving in early 2013 to join BlueMountain. He made the shortlist when Barclays last looked for a CEO three years ago.
"His appointment will indicate a greater commitment to the IB (investment bank), but then Barclays' profitability problems are linked to the IB and not the traditional bank," said Chintan Joshi, analyst at Nomura.
Previous CEO Antony Jenkins was fired in July after losing the support of non-executive directors in a clash over style and the pace of the bank's turnaround.
Jenkins set about reducing the importance of the investment bank after a series of scandals, while changes in regulation also made many trading activities unprofitable. It was intended as a clear break from his predecessor Bob Diamond, another American investment banker.
Investors and analysts said Staley should improve morale and set a clear strategy for the investment bank after years of uncertainty, but they warned he should not build it back up aggressively.
"At first sight he would not appear to be the person to downsize the IB, but maybe that is too much of a snap reaction," said Richard Marwood, senior investment manager at Axa Investment Managers.A top 20 Barclays investor, who asked not to be named, said: "We don't have a problem with them retaining some investment banking activities, it just needs to be done in a rational way ... given the volatility and reputational risk that comes with the investment bank, the bar needs to be set very high."
Barclays shares were down 2.6 percent at 249.9 pence by 1340 GMT, underperforming a 2 percent fall by Europe's bank index <.SX7P>.
Any appointment would also still depend on Staley getting approval from Britain's financial regulators.
The appointment is expected to be announced in the next two weeks, according to the Financial Times, which first reported the expected hiring.
A Bank of England spokeswoman said on Tuesday no-one had been approved yet as new Barclays CEO.
Barclays said it noted the speculation regarding Staley but the process of appointing a new CEO "has not yet concluded".
"If this change is approved, it could signal that UK and U.S. regulators are comfortable with the renewed ascendancy of investment banking," said Jim Antos, analyst at Mizuho Securities Asia in Hong Kong.
Staley, a keen yachtsman, joined JPMorgan in 1979 and spent eight years in its Brazilian business. He helped found its equities business and later became CEO of asset management.
He was long seen as a possible successor to JPMorgan CEO Jamie Dimon, but was sidelined after a management reshuffle in 2012 and moved to BlueMountain a year later.
Staley will face a number of challenges at Barclays.
The bank is just over halfway through a three-year plan to cut 19,000 jobs, including 7,000 in the investment bank, and it still faces litigation issues.
It needs to cut costs to improve returns, is trying to wind down 57 billion pounds of non-core assets, and needs to separate its domestic retail bank from more risky activities by 2019 to meet new regulations. Industry sources have said it has had more difficulty finalizing its "ring-fencing" plans than rivals.
Staley, who also previously ran JPMorgan's private banking, may also look to fix Barclays' underperforming wealth management business.
Barclays Chairman John McFarlane, who has been running the bank since Jenkins' exit, has also put more emphasis back on the investment bank and this week said European investment banks should consider merging to create a regional champion to compete with U.S. rivals, which are gaining market share.
An appointment of Staley would see a second former JPMorgan investment bank boss running a British bank, after Standard Chartered <STAN.L> this year picked Bill Winters as its new CEO.
Barclays' Finance Director Tushar Morzaria is another former JPMorgan executive, showing the growing influence of the U.S. bank's alumni in London.