By Jon Penner
LONDON, Feb 6 (IFR) - Barclays has closed its Zurich debtorigination and trading operation less than four years afteropening it, as the bank seeks to exit unprofitable businesses.
The shutdown of Barclays' Swiss desk is the latest in astring of closures of marginal operations by various investmentbanks hit by harsher capital requirements and comes after thebank began a cost-cutting programme that could see up to 400 jobreductions in corporate banking.
Barclays had struggled in the Swiss market since it publiclyannounced its start-up there in July 2010. So far this year, ithas only been involved in one new issue out of the 45 priced -the EIB Climate Awareness Bond, where it acted alongside CreditSuisse and Deutsche Bank.
It currently sits at number eight in the league tables. Itfinished 2013 at number nine with a 2.1% share of the market,ahead of VTB Capital, which only gets involved in a few Russiandeals, mainly VTB's, in the franc.
One syndicate official at a rival Zurich-based bank saidthat it had only been a matter of time for Barclays. CreditSuisse, UBS, ZKB and, to some extent, Raiffeisen Schweiz's holdon the market serves well to keep foreign banks at bay.
Meanwhile, another Swiss banker said that projected growthfrom when it started was overly optimistic. While 2009 saw morethan CHF63bn priced by international credits, 2010 was down 26%,at CHF46.6bn.
The following years saw further decline, with only CHF33.1bnand CHF35.8bn printed in 2011 and 2012, respectively. Thoseyears were on average down over 45% from the 2009 highs.
"The fee cake has not grown over the years" said a DCMofficial at a Swiss bank. "In fact, it has shrunk ratherdramatically, especially if you only have access to theinternational sector. It used to be that if you missed a deal,another would crop up fairly quickly. Nowadays, those windows ofopportunity get slammed shut pretty fast and it can be weeksuntil a similar trade comes your way."
BASIS SHIFT
The decline in international supply was further exacerbatedby the Swiss National Bank's decision to put a floor on thevalue of the franc in 2011. With rates hitting all-time lows,the shift in the cross-currency basis swap made issuance inSwiss francs even less cost-effective for many borrowers.
The low rates would have necessitated a negative coupon forsome Triple A rated borrowers, not a palatable or viableproposition for many investors.
Others bankers blamed the size of Barclays' operation,saying it did not have the critical mass required to reallyperform in the small market.
Despite Barclays' set-back, however, other foreigninstitutions in Switzerland are not worried. A banker at one ofthem said that the set-up and focus for most of the remainder isdifferent from that of Barclays'.
Commerzbank and HSBC only restarted their small operationsin 2013. Both are thought to be concentrating on emergingmarkets where they have a global franchise, with Commerzbankfocusing on Eastern Europe and HSBC on Asia.
Deutsche Bank, BNP Paribas and RBS are all old hands in theSwiss market and have their own niches to fill. But Barclays'set-up pitted Swiss franc deals head to head against the majorcurrencies, so "if you won a Swiss franc mandate, you hadalready lost", opined one Zurich-based trader, given that it hadlikely come at the expense of another transaction.
The small team of three, which included Martin Meili, whojoined the bank from RBS as head of syndicate in 2010, isunderstood to have left their roles at the bank, although theirfuture remains undecided.
Barclays declined to comment.