The MT interview: John Varley

His actions belying his quiet, patrician looks, the CEO of Barclays is having to battle an international credit storm as he seeks to transform the group into a global player. Losing out to RBS in the battle for ABN Amro has done nothing to stall his ambitions.

by Chris Blackhurst
Last Updated: 31 Aug 2010

A little over 20 years ago, Tom Wolfe wrote of Wall Street bankers and traders dealing in vast sums and moving in a world that was totally detached from the experience of ordinary people. He called these super-remunerated beings 'masters of the universe'. It was fiction, but down the intervening period, their pre-eminence has become ever more real.

We don't manufacture much any more in Britain; the old industries have all but gone. The new kings of commerce are the bankers - men (they are nearly always men) who invest, speculate and deal on a scale that for most people is unimaginable. Top of the tree are the heads of the banks, those who oversee the whole edifice, who report profits running into billions without blinking. Recently, though, they've also been disclosing losses that boggle the mind.

In this country right now, one such master is John Varley. He's the chief executive of Barclays, a proud name in British banking and now a global player, one that is intensely ambitious and last year tried to strike an £80bn merger with Dutch rival ABN Amro. In Barclays Capital, its investment banking arm, it has a formidable player in the world's financial markets.

But Varley is also in the centre of the credit storm sweeping the globe. Yes, his bank made £7bn-plus last year, but he's under orders from his shareholders to do the same and more in 2008 - against a backdrop of fragile liquidity and ferocious volatility.

He doesn't conform to the image of a capitalist Titan. His hair isn't slicked back, he's not loud, he doesn't thump tables. He cultivates a fogeyish look, favouring three-piece suits and rimless spectacles. This, plus his head of silver hair, can place him in a different era. He's quietly spoken, courteous and considerate.

His tall, lean frame and slight stoop adds to the patrician and studious air. Yet there's a hint of mischief. He wears brightly coloured braces and ties. There's a steely glint in his eye. It once came up in conversation that he and I share an enthusiasm for table tennis. I was challenged to play him in the Barclays HQ foyer at Canary Wharf. Apparently, he had played Paul Idzik, his chief operations officer, in the same spot.

He treated our encounter as I imagine he would a duel in a bygone age. He turned up in his work clothes, bristling with concentration and purpose. His jacket was handed to a minder; he rolled back the sleeves of his crisp white Egyptian cotton shirt and play began.

While I was all for hitting the ball anywhere, he was striving for acute angles and solid defence. Time and again he blocked my attacks. I pictured him at school, taking on all comers at ping-pong in the sixth-form common room; while they huffed and puffed and ran around, he stayed rock-still, wearing them down with his long reach and straight bat. I lost.

Today, we meet after Barclays has turned in its annual results. They're in line with forecasts - something of a miracle, considering the industry trauma of the past months. Barclays has also written off just £1.64bn on buying bundles of risky sub-prime securities. The 'just' may sound fatuous, but compared with other write-downs, Barclays' hole is not major-league.

Varley gave more good news to investors when he upped the dividend. And all this came against a backdrop of turbulence for the bank - over and above the chaos in the markets - when it became locked in a bidding war with Royal Bank of Scotland for ABN Amro. In the end RBS won, but Barclays' figures show that despite the intensity of the conflict, it did not lose focus.

We're sitting in a lounge area outside Varley's room. It could be part of a trendy hotel anywhere in the world. The whole Barclays building is like this - on one floor there are green plastic cubicles, like glorified bus shelters, in which staff can seek refuge and gather their thoughts.

Up here on the top floor there are the executive suites and an abundance of meeting rooms. Do you want relaxed? They do sofas. Modern formal? Over there on the left. Trying to impress a foreign guest with some antiquity? They've recreated part of their original City premises, complete with dark wood panelling. Need a giant table? There's the boardroom. They have offices to suit your every mood and purpose.

Varley throws himself into an easy chair and splays those long limbs. Drinks are fetched. There's a crib-sheet on the side in case he misses anything. He barely glances at it.

How is he? 'I am pleased with how we came through 2007,' he says, running his hands through his hair. 'It was a big test of how street-wise we were and a big test of our financial discipline. There was a lot of distraction because of ABN Amro - and in parts of our world. But look at BarCap (Barclays Capital, the part that has taken the biggest clobbering); look at how well it managed risk. It was a year when we could easily have dropped the ball, and we didn't.'

Anyone could be forgiven for supposing, he says, that all banks have been affected in the same way. Not true. 'Our performance at BarCap in 2007 shows we saw the risks early, we were managing them down during the first half of the year. Nothing took us by surprise. Our BarCap income was up 14% - which is a significant statement of successful risk management.

'As well, we concentrated on broadening our base, and achieved that in commodities, equities, retail, Africa and Asia. They were much less developed five years ago than they are today.'

He admits to some write-downs. 'But is the business strong enough to absorb those? Yes, it is.' He pauses. 'This is the area where some people have lost the wood for the trees. The question they need to ask is: can we manage our p&l performance year on year? Well only three investment banks made more in '07 than '06 - BarCap, Lehman and Goldman Sachs. Most were down. Ours was a stand-out performance.'

This is said without hesitation or deviation. If he was on Just A Minute, Radio 4's panel game, he could talk for an hour about BarCap.

The City can't quite believe BarCap. Some UK high street banks, notably Lloyds TSB, have steered clear of investment banking, while others - such as HSBC - ventured into it without great success. Barclays is different. A bank that can trace its roots back to Quaker owners is competing and winning on a stage dominated by aggressive Americans such as Goldman and Lehman or European giants like Deutsche and UBS.

The old City adage is that if something sounds too good to be true it probably is. Varley knows there are plenty who are waiting for BarCap to come a cropper. It's a massive strength, but the fragile nature of the markets in which it operates makes it a potential source of weakness, too.

BarCap is managed by Bob Diamond, who is everything Varley is not: American, sleek and slick, a populist loved by the media - and a Chelsea fan. A pin-up of the financial community, he's a stellar player much coveted by Wall Street. He also earns far more than Varley - the startling sum of £36m last year, including cash bonus, share options and incentives. By contrast, Varley was paid a modest £4.1m for the same period.

When Matt Barrett stood down as CEO in 2004, there were two front-runners to succeed him. One was Varley, the other was Diamond.

Says Barclays chairman Marcus Agius: 'John has an exceptionally incisive brain. He sees things very, very clearly, which is not always the case. He's extraordinarily articulate. He's also got very high ambition, not for himself but for the bank.'

Adds another Barclays insider: 'Under the velvet glove there really is an iron fist. Varley sets a very high work-rate for himself, and if others don't perform, they part company with him. He's much tougher than he looks.'

Varley's father was a Midlands solicitor and he went to Downside, the Catholic boarding school, where he was head boy. He's a church regular still. He read law at Oxford and joined solicitors Frere Cholmeley. Then he quit. 'I was happy there, but I felt it was important I took a real decision and not end up a lawyer by default. The truth was, I didn't enjoy the law.'

His wife Carolyn, with whom he has children aged 12 and 18, is the daughter of Sir Richard Pease of the Quaker family whose bank was bought by Barclays in 1902. His father-in-law suggested Varley go and see Lord Camoys at Barclays Merchant Bank and - apart from one spell - he has been with the group ever since.

Much is made of this family link. It's true that Varley got an entry, but after that, say those at the bank, it was down to him. The idea that he secured the top job over Diamond because his wife is a Pease is laughable. 'It doesn't count for anything these days,' insists a senior source at Barclays. 'If he said, "My wife is one of the family so promote me", he'd be told where to go.'

Varley learned the ropes from Nicholas Sibley, chairman of BZW, then the investment banking arm, in south-east Asia. 'Sibley was a great mentor. He understood the importance of developing and hiring the best people. He talked the language of customers and clients. He was also nicely idiosyncratic. In my first conversation with him on arriving in Hong Kong, where we were deciding who did what - he as chairman and I as MD - he described his role as "floating round the region on a pink cloud clutching a cherub". For all this self-deprecation, he knew what was what, and I learnt a lot from him.'

The blip in his ascent at Barclays came in 1994. Varley had climbed as far as deputy head of global equities for BZW. He was burnt-out and stressed. 'I felt physically exhausted. What I do now is exhausting, but back then I was completely whacked. I also felt I'd done all I could.'

He left to work for Crispin Odey, his sister-in-law's husband and a pioneer in the hedge-fund industry. 'It was a different experience and I loved it.' But it was a part-time post and, after 18 months, he was ready for something full-time.

He rejoined Barclays, in charge of asset management. No sooner had he taken over what was a quiet backwater of the group than his division bought the fund-management operation jointly run by Wells Fargo and Nikko, and exploded in size. 'We'd suddenly gained one of the biggest such businesses in the world,' he says. Even now he can scarcely believe his good fortune.

From there, he was elevated again to running retail. Varley's period overseeing the high-street branches was controversial: he charged customers for using cash machines and took the axe to many branches, particularly in country districts. And it was Varley who welded the Woolwich to its new bank parent, not entirely happily.

The post of finance director followed and then, in 2004, after a straight fight with Diamond, he became CEO. It says a lot about Varley that he is content for Diamond to be paid much more than he is, and that the charismatic American has been happy to remain.

While Varley's predecessor had done much to improve morale after a torrid spell, there is no denying that Varley didn't exactly inherit a company in great shape. He has transformed the culture - not always to the liking of old-timers - with a raft of aggressive, expansionist hires, including Idzik and Frits Seegers from Citi to run retail. Varley has built the bank around Diamond and Seegers, with Idzik as COO and Chris Lucas as finance director. 'We've got all our ducks in a row. We're very self-confident, because we're clear about what we're seeking to achieve.'

Varley's pursuit of growth, organically and through acquisitions - culminating in the tilt at ABN Amro - has been fast and relentless. 'In my first conversation with the board after I'd got the job, I said I believed there was a different trajectory of growth available. I said I needed them to take a clear, irrevocable, unambiguous decision to internationalise and diversify.

'I wanted them to commit to a growth rate beyond anything ever experienced by Barclays, within five to 10 years, three-quarters of our earnings coming from outside the UK.' Not getting ABN after making all the running was a blow for Barclays. 'I am really disappointed at the strategic level, but I never want to overpay.' The rightness of the decision not to do so became stronger as the markets melted down.

Was there a Plan B? 'No, our strategy hasn't changed as a result of not getting it. There are 7 million credit-card customers in ABN Amro and obviously that would have been nice to have, but Frits has recruited 2.4 million outside the UK in the last year.' He smiles. 'We've got plenty of things to be getting on with. Our business base is so large. We have a strategy and that will be developed aggressively.'

So what about him versus Diamond? The smile vanishes. 'He and I both continue to be chief executives of Barclays - Bob in investment banking and me in the group. We've been colleagues on the executive committee since 1997. I see Bob as a partner. I can understand why personalities can get in the way of good business coverage, but the idea that we have some sort of dysfunctional relationship is pure fiction.'

Diamond is seen by some as the real power within Barclays, but Varley insists he is the one with the overview. 'My role as CEO of the group is to deliver two things of super-ordinary importance - maximising the alignment of what we have in Barclays and finding the best team in the world.' To that end the Varley-Diamond rivalry, real or imagined, is crucial: 'Would the best team in the world look like five John Varleys? No. Do shareholders want four clones of me? No.'

He leans forward. 'Bob is one of the best investment bankers in the world, period. Having somebody as good as him has driven me to create the executive committee I have. I've gone out and found the best specialists. Are we identikit? No. It's like the best football and cricket teams - they have players with different skills and strengths.' Maybe it's as well that Diamond has announced he is to spend half his time in New York.

In Varley's four years in charge, there have been constant comings and goings at the top. It has not made Varley popular. 'A lot of appointments had to be made,' he says, shrugging.

There has been a cultural shift too. The American Idzik, for instance, has ensured the bank's staff are far more aggressive and competitive than they were. Some of his methods, though, have raised eyebrows: on his first day, he vaulted the security barrier and ran to the lift. When he wasn't stopped, he had the security guard sacked. On another occasion, he saw an employee using a pen bearing the name of a rival bank - he reached over and snapped it.

Varley approves. 'Around 20% of the business flow is in the hands of the top 12 players. In most industries, it would be 50% held by those at the top. The competitive pressures in becoming one of those players and staying there are enormous. I had to prepare Barclays for that.'

That meant putting investment banking and investment management together under Diamond. It also meant putting all the bank's retail and credit-card operations under the control of Seegers. 'This represents a seismic shift for Barclays. It's meant a lot of people changing roles.

'I ruthlessly changed the centre.' He pauses, conscious of how that might sound. 'Whether ruthless is the right word or not, I don't know, but I've changed it. I had to create a leadership team that could manage this shift. Look at Frits - he's had an electrifying effect on our speed of development and service to the customer. For example, we can be the fastest credit-card company in India - which is a huge potential market. We simply didn't have that capability before.'

His aim is to make the bank fit for purpose, 'to catapult Barclays to becoming one of the handful of global banks leading the industry'.

He's getting there. Profits in '04 were £3.5bn, of which 20% came from abroad. Today, profits are £7.1bn, with 50% non-UK. 'There is a lot more of that out there. The acid test is: what are we doing for customers to make sure we're in touch with what they want around the world?'

To that end, says Varley, he makes a point of dealing with customers personally. 'It's a requirement of our leadership that we should be in contact with customers - it's hugely important.'

Sensing my scepticism, he adds: 'In the last 24 hours I rang a customer who'd been having a problem with us that wasn't his fault. Saying sorry always helps. And I've visited a customer who has been with us for a long time - both with his business and his personal affairs. I went to see if we could do more for him. Visits like that are why I'm in this business. If things have gone wrong, putting them right can be fulfilling.'

He insists that, notwithstanding the rows about excessive bank profits, 'for this organisation, the motivation is not in making money but in serving customers and our shareholders. There's no point in me exhorting 130,000 people to make money.' Banks, he claims, are much maligned. 'If they are good at what they do, that makes a big impact. I'm a firm believer in banks being a motivator for growth.'

Isn't he being a tad defensive? 'I'm not being defensive about making £7bn. If I look at how much we pay in tax, it's £4bn - that's a lot of roads and hospitals. Our profits belong to our owners and they're mostly pension funds - there are a lot of pensions around the world that are dependent on Barclays doing well.'

There's no stopping him now. 'We're heavily regulated. We have the important task of looking after other people's money. There's a mythology in the media and government that the £7bn was all made out of personal customers. It was not. Our UK retail banking business contributed £1.3bn of that total. I say to our people: "Don't be defensive when you're in the pub with your mates. Don't look at your shoes and mumble you're a banker - you should be proud because you are good for this country."'

Neither should they be ashamed of what they earn, he says. Diamond is paid over £15m a year, and there have been noises about Barclays people raking in vast sums - something that goes against the Quaker ethos. 'I've got to be competitive,' says Varley. 'If I'm not, somebody else will employ them. We've got to be wholly market-oriented in our approach to compensation.'

Yet he's no bulldog capitalist. He chairs Business Action on Homelessness and is president of the Employers' Forum on Disability. 'You've got to have your own style. There's no point in me recreating somebody else's. If you're trying to be something you aren't, people will see straight through that. I've got to be myself.'

1. To weather the credit crunch and US recession successfully
2. To prove there is life after losing ABN Amro
3. To grow Barclays and make sure it's a first-division global player
4. To master the attacking forehand loop in table tennis


1956: Born 1 April in the Midlands. Educated at Downside, Oriel College, Oxford and the London College of Law

1979: Articled clerk at London solicitors Frere Cholmeley

1982: Joined Barclays Merchant Bank; worked at BZW, becoming its MD in south-east Asia

1994: Left to join Crispin Odey in hedge fund management, later returning to Barclays

1997: Member of Barclays executive board. Held various positions within Barclays

2004: Barclays group chief executive.

Find this article useful?

Get more great articles like this in your inbox every lunchtime

Why you overvalue your own ideas

And why you shouldn't.

When spying on your staff backfires

As Barclays' recently-scrapped tracking software shows, snooping on your colleagues is never a good idea....

A CEO’s guide to smart decision-making

You spend enough time doing it, but have you ever thought about how you do...

What Tinder can teach you about recruitment

How to make sure top talent swipes right on your business.

An Orwellian nightmare for mice: Pest control in the digital age

Case study: Rentokil’s smart mouse traps use real-time surveillance, transforming the company’s service offer.

Public failure can be the best thing that happens to you

But too often businesses stigmatise it.