Top shareholders are saying Bob has to go. But where would that leave Barclays (Capital) and everyone who works there?

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When Bob Diamond joined Barclays Capital from Credit Suisse First Boston in 1996, it was still a mere zygote compared to the fully fledged investment bank it's evolved into since. As recently as 2003, BarCap employed only 5,800 people. Between 2003 and 2007, it hired another 10,000 under the so-called 'Alpha Plan.' In 2008, it acquired Lehman, adding another 6,900 people, bringing the total to 23,100. By the end of 2010, it employed 24,800 after expanding in Asia, equities and M&A. Last year that was reduced, but not by much, to 24,000.

The architect of this expansion is usually seen as one man: Bob Diamond. The former business school lecturer had a vision for Barclays Capital, which he pursued with lieutenants Jerry Del Missier and Rich Ricci. But now Bob, Jerry and Rich Ricci have been wounded by the Libor affair. Even if they didn't know about the 'Big boy' emails, Barclays has admitted that it deliberately falsified Libor rates at the extremes of the financial crisis to give an impression of strength.

Barclays (Capital) looks vulnerable.

On the plus side, Bob has said that he won't resign.  The Guardian speculates today that this may because Barclays' lawyers have warned that a resignation would be an admission of culpability and expose Barclays to litigation. However, Morgan Stanley banking analysts Huw Van Steenis and Chris Manners met with Bob Diamond yesterday and give the impression that Bob is confident in his position: "The CEO was appointed 18 months ago with the full approval of the FSA in knowledge of this investigation," they point out.

And yet this morning, there are various calls from unnamed big Barclays investors for Bob Diamond to leave.   “All these issues have taken place under his watch and he should go,” a 'leading investor,' tells the Financial Times. "Bob Diamond has to go. Not just because he is CEO now but because he was CEO of BarCap [Barclays’ investment bank] then. I’d be surprised if he lasts the week,” a 'top 30 investor' says in the same FT article. Most ominous, however, is the quote from a 'seasoned fund manager' in the Telegraph: "“Bob is mistrusted in the City, but he’s the glue that holds the whole thing together. Without him it might well disintegrate.”

Don't forget Naguib

Would it disintegrate? It suddenly looks very fortuitous that Barclays rehired Naguib Kheraj as finance director from Lazard last April. 

Kheraj first joined Barclays from Salomon Brothers in 1997 and became 'global head of investment banking' and chief operating officer a few years later. Like Diamond, he had a vision for Barclays Capital and was instrumental in building the investment banking business in the late 1990s and early 2000s. However Kheraj - who was possibly seen as a threat to Diamond (by Diamond) was moved into Barclays Global Investors and onto the main board, before leaving for Cazenove in 2008.

Now Kheraj is back, and in the nick of time. As Ian King points out in the Times today, Bob Diamond, Jerry del Missier and Rich Ricci have all been damaged by the Libor scandal - as, arguably has Chris Lucas. Having spent time away, Kheraj - however - is untouched. A Kheraj accession would be no bad thing for Barclays' investment bankers.

By comparison, the elevation of Antony Jenkins, chief executive of Barclays Retail and Business Banking, could be far more destabilising. So far, Barclays (Capital) has resisted making many investment banking redundancies. Under Jenkins as a new, non-investment banking-focused chief executive, this could change.

The other option   

Bob may not yet need to resign. There's another palliative for Barclays' failings.

This is that the FSA releases other, similarly incriminating emails from RBS, HSBC, Lloyds, JPMorgan, Deutsche, Bank of Tokyo Mitsubishi and the others under investigation in the Libor affair.

Barclays' investment bankers need to hope these incriminating emails emerge soon - preferably next week. Alternatively, they need to hope that if Bob goes, Kheraj replaces him. Other outcomes could prove very destabilising indeed.

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