Barclays' potential investment bankers are feeling more excited now
As we have reported here often, there have been issues in Barclays' investment bank over the past eighteen months. These issues were related to the hiring of Cathal Deasy from Credit Suisse and to the subsequent promotion of Deasy and Taylor Wright as co-heads of Barclays' investment bank. This was semi-coincident with the exit of the popular Marco Valla for UBS, along with various other long-serving Barclays bankers, who claimed not to have been paid as promised.
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When Deasy and Wright made their presentation this week on their vision for the future of Barclays' investment bank, it therefore represented an opportunity to lay the recent problems to rest. For some former sceptics, it's a whole new start. For others, it's the same old shizzle.
"It's smart," says one banking managing director (MD) who says he interviewed with Barclays in the past few years, but didn't end up joining them. "They've got a strong three-year plan to improve performance and it revolves around integrating the investment bank more closely with the corporate bank to create a unified institution serving high value clients across multiple financial needs. It's capital light and efficient, and it balances the investment bank with the more stable revenues from the corporate bank," he enthuses.
MDs who gave Barclays a pass in the past aren't the only ones feeling warm about its future. In a note out this week, European equity research analysts at JPMorgan described Deasy and Wright's plan as "encouraging" and said there's scope for "further revenue upgrades" if it works out.
Treasury bankers who sit between the corporate bank and the investment bank have an important part to play in Deasy and Wright's vision. Right now, 92% of Barclays' investment bank customers in the UK use its corporate banking products, compared to only 30% in the US. If its US treasury coverage bankers can nudge their percentage higher, Barclays will be on the way to its desired $700m of additional revenues before 2026.
Investment bankers also have a role to play. Deasy said Barclays now has 40 "sub-sector" leads, compared to 11 previously, and that 64% of the MD hires Barclays has made since last year are in coverage roles (the remainder are in ECM and M&A advisory). The bank now has a 20% share of the "wallet" for advisory and ECM combined in industrials and technology and a 17% share in healthcare. That could grow more.
Nonetheless, not everyone is sold on the future. One London headhunter says it's become easier than ever to pull M&A bankers out of Barclays and points to recent exits like that of Enrico Chiapparoli, the co-head of industrials for EMEA, who left for SocGen in August, and to Thierry Le Palud the global chairman of industrials in investment banking, who went to Jefferies in July. Will Thompson, Barclays' head of healthcare investment banking, left for Lazard around the same time. The bucket has a leak.
The leak is partly people related. While Barclays' US franchise was destabilised by the disappearance of Valla and the arrival of Deasy, the London business is settling under Stephen Pick, the new head of EMEA M&A. Pick only arrived in August. Like Deasy, Pick came from Credit Suisse. And like Deasy, his arrival was preceded by some grumbles about pay.
If Barclays wants to keep people happy as it executes on its new plan, sources say it will need to pay its existing bankers better in 2024. This could be difficult when it's also trying to reduce its cost income ratio by 200 basis points, or more. If not, it could always hire some more outsiders. We know of at least one MD who might now like to join.
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