LONDON — Robert E. Diamond Jr., who built Barclays PLC into a global powerhouse in investment banking and has been criticized for his lavish pay, will become chief executive next year, the company announced Tuesday.
Diamond, branded "the unacceptable face of banking" by a former government minister, will succeed John Varley, who guided Barclays through the credit crisis without resorting to a government bailout.
Diamond will take over as CEO on March 31 after 14 years with the company.
The 59-year-old American's rise comes as governments review regulation, including a possibly momentous move in Britain to force lenders to divorce investment banking from retail operations. At home, Barclays may also feel pressure from the government's austerity drive which will shrink public spending.
Following its acquisition of Lehman Brothers' U.S. operations, Barclays has become heavily dependent on the investment banking activity which is now Diamond's domain.
Barclays Capital now commands 60 percent of the company's capital needs, a share that may increase due to regulatory changes, yet is likely to be less profitable than the Barclays retail side, Evolution Securities said in a research note.
Diamond's salary will be 1.35 million pounds ($2.08 million) with bonuses of up to 250 percent of that figure. The bank said it also intended to award a long term, performance-based share incentive of 500 percent of base salary in 2011.
Diamond was paid 250,000 pounds last year and waived his bonus, but he reportedly also gained 26.8 million pounds from his shares in Barclays Global Investors when it was sold to Blackrock fund manages.
Peter Mandelson, the business secretary in Britain's previous government, said in an interview with The Times in April that Diamond hadn't earned the money, "he has done so by deal-making and shuffling paper around."
"That to me is the unacceptable face of banking," Mandelson said.
Barclays' chairman Marcus Agius told reporters in a conference call that Diamond's compensation was "well benchmarked" against the pay of other chief executives of major banks, but the pay package may be politically sensitive.
"In times of austerity, industry compensation continues to sit uncomfortably with politicians and the electorate, while questions over broader European banking strength have resurfaced," said Keith Bowman, analyst at Hargreaves Lansdown Stockbrokers.
Still, experts say Diamond is highly respected in the industry for his development of the investment banking operations over 14 years.
"We believe his appointment as group CEO reflects progress delivered at BarCap and the importance of the investment banking operations in the group's future strategy," said Danny Clarke, analyst at Shore Capital.
Under Varley's leadership, Barclays secured private investment in the Middle East to shore up its capital position during the credit crisis, and he led Barclays' move to expand its investment banking business by acquiring the U.S. operations of Lehman Brothers following its collapse.
Varley said it was his intention when he took the top job seven years ago that he would move on at age 55, a milestone he reaches in April. He will continue as a special adviser on regulatory matters for another six months beyond his retirement date.
Jerry del Missier and Rich Ricci will become co-chief executives of Barclays Capital, effective October 1.
Barclays shares were down 3.14 percent at 312.8 pence in midmorning trading on the London Stock Exchange.
"Barclays is one of the very few stocks in our universe of banks that shows downside," said Arturo De Frias, analyst at Evolution Securities, who rates the bank's shares as "sell."
He said that in the last three months, Barclays stock has rise less than half as much as the wider banking sector. "Given the considerable pressures on investment banking returns, we expect this underperformance to continue."