RE: Barclays Overtakes Credit Suisse in Investment Banking26 Jul 2021 19:37
Barclays’ strategy is to boost revenue in mergers and acquisitions and equity capital markets, or helping companies issue new shares. Both areas have been strengths of Credit Suisse.
Barclays recently promoted New York-based bankers John Miller and Jean-François Astier to lead a new management team for the investment bank, a signal of the bank’s intent to grow. The new team will implement the expansion strategy, Paul Compton, a member of the bank’s executive committee, said last week.
The latest progress report card comes Wednesday, when Barclays announces its results for the second quarter.
An example of its investment banking wins: Barclays advised and arranged financing for a group of private-equity firms that agreed to buy medical-supply company Medline Industries Inc. for more than $30 billion, in one of the largest leveraged buyouts since the financial crisis.
Barclays has struggled in previous attempts to get its investment bank into the top tier. It took over the U.S. business of Lehman Brothers Holdings Inc. in 2008 and tried to create a global footprint, only to scale back sharply earlier this decade.
Mr. Staley, who joined the bank in 2015, reversed efforts by his predecessor to cut back the investment bank. One of his bankers described him in a recent interview as riding in on a white horse to save the operation.
But the profits flowing into the investment bank aren’t encouraging investors to flock to Barclays shares. Barclays is worth about 0.53 times its book value, less than the 0.72 times book value at which British retail-banking rival Lloyds Banking Group PLC trades.
There is concern that increasing pay will push up costs at the investment bank, according to Christopher Cant, an analyst at Autonomous Research, a unit of AllianceBernstein.
“The question now for Barclays is: How low can they hold the cost-to-income ratio for that division?” Mr. Cant said. “The revenue performance has been very good, but how much of that are they going to bleed away?”
Past forays into investment banking have ended in failure at other lenders. It is a notoriously volatile business, booming when times are good, as they are now. But revenue can evaporate quickly, while costs stay high.
A senior banker at Barclays said that the bank can’t afford to slip up. European competitors including Deutsche Bank AG and UBS Group AG have scaled back investment banking operations in recent years in the wake of billions of dollars of losses.
The bank is also rebuilding its presence in Asia, where Barclays reduced its presence drastically before Mr. Staley took charge. In Australia, Barclays is investing about $33 million in Barrenjoey Capital Partners, a new Australian financial advisory firm with which it will partner to provide services.
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