The new Group CEO Jes Staley is accelerating a plan that the bank hopes will refine and strengthen its investment banking efforts.
Barclays will be shrinking its investment banking staff in Asia and elsewhere by 1,000 or so as a result of the bank’s decision to exit markets that are proving to be a challenge for global financial services firms.
Overall, the investment bank of Barclays “will continue to focus on its two home markets in the U.K. and U.S. and to develop its global franchise, building on areas of competitive advantage and the strength of its client relationships internationally, while exiting certain product lines,” according to an official statement from the bank. “We will close offices in nine countries across Asia, the Americas and EMEA.”
Jes Staley, Group Chief Executive, Barclays
The strategy shift is not entirely unexpected as industry observers said previously that when Barclays named industry veteran James E. Staley to lead the firm, change would be coming to its investment banking efforts. The overhaul was expected to be part of a new era away from legal battles with government authorities and regulators and sudden executive shuffles. Staley was officially appointed as Group CEO of Barclays on Dec. 1, 2015.
The Staley appointment followed the board’s dismissal of Antony Jenkins who served as CEO for three years. Barclays officials said at the time that parting company with Jenkins was done to make way for a CEO that can “accelerate the pace of execution going forward.”
The acceleration appears to be needed as the bank expects “to report investment bank income broadly flat on the prior year” when results for the fiscal year that ended Dec. 31 are announced on March 1, Barclays officials say.
In a prepared statement, Staley confirms that these latest actions “are accelerating the investment bank strategy outlined in 2014, focusing on its core strengths and running the business for returns. We continue to build on the business’s dual home markets in the U.K. and U.S. and remain committed to a strong presence in Asia and EMEA, consistent with operating a leading global investment bank within the Barclays Group.”
The Asian Retreat
Across Asia, the bank “will continue to provide expertise and resources to clients who have cross-border requirements from offices in China, Hong Kong SAR, Singapore, Japan and India,” officials add.
However, the Asian exit is likely to result in a loss of 1,000 to 1,200 jobs with two-thirds of those layoffs coming from investment banking efforts in Asia, according to multiple media reports. Barclays officials are declining to comment on the actual number of job losses to come.
Starting in 2014 and continuing to the end of this year, Barclays intends to trim a total of 19,000 jobs in an effort to cut costs amid shrinking trading revenue. Roughly 7,000 of those layoffs were slated to take place in the investment banking area, with a particular focus on the bank’s fixed income, currency and commodities desk (FICC), as FTF News has previously reported. The bank reported that it had about 132,000 employees at the end of 2014.
Thomas King, Chief Executive Officer of the Investment Bank, Barclays
In a new internal memo obtained by FTF News, Thomas King, the CEO of Barclays’ investment banking business, acknowledges that there will be staff cuts. “We regret that some colleagues will leave the organization as a result, and I would like to thank them for their commitment to Barclays and wish them the very best for the future,” King says.
The retreat from Asia is part of the bank’s continuing evolution to refine and strengthen its “bulge-bracket investment bank,” King says.
“Since we announced our strategy in May 2014 we have accomplished a lot,” according to the King memo. “Our returns have improved and we are ahead of many of our peers in re-shaping our franchise. But there is more to do before we deliver the potential of our business.”
The bank will be doing much to refine its Asia Pacific business even though it will remain “an important part of our global network,” King says.
“We are sharpening our focus on the geographies and products where we have a clear competitive advantage, with a physical presence only in China, Hong Kong, India, Japan and Singapore,” King says. “We will continue to provide expertise and resources to global and local clients in the region who have cross-border requirements, with a particular focus on connections to the US and EMEA.”
The bank will stay “committed to our strong EFS [equities and funds structured markets] and equity finance franchises in Asia Pacific, and to our mature macro and credit businesses in the countries where we maintain a physical presence,” King says. “We will discontinue Asia Pacific local cash equity products, with the exception of electronic execution-only services. We will no longer pursue high-touch equities sales, trading, or research coverage of Asia product in any region.”
King says that Asia Pacific “remains the key global infrastructure hub for Barclays,” and that in Asia, the bank will continue to provide “a full client offering in debt financing, risk management and cross-border M&A. We will focus our equity capital markets offering on equity-linked financing, derivatives, and taking our local clients to the international capital markets, particularly the U.K. and the U.S.”
Changes for EMEA, The Americas
For the bank’s business in EMEA, King says that Barclays is “the only bulge-bracket investment bank headquartered in the UK, and that makes us uniquely placed to support U.K. and EMEA clients in decreasing their reliance on bank balance sheets, by strengthening the capital markets to support economic growth.”
King adds that the Barclays EMEA franchise will:
- Still deliver “a full spectrum of investment banking products and services to our clients across the region, with supporting infrastructure and execution capabilities anchored in our UK hub;
- Continue to anchor its Central and Eastern Europe, Middle East and North Africa (CEEMENA) coverage teams in London and Dubai. “We will discontinue sales and research coverage of CEEMENA cash equity products and centralize execution in London,” he says;
- And cover key Russian corporate and financial institutions through dedicated London-based teams even though the bank is closing its Moscow office.
“We are evaluating various options for the exit of our precious metals business, and in the process will seek to minimize disruption to clients, colleagues and the market,” King adds.
In the Americas, Barclays will be making changes to its securitized products business, King says. “An immediate step in that evolution will be to focus our securitized products capability in origination-led asset backed and commercial mortgage backed securities,” he says in the memo. “Our agency pass-through business will be incorporated into our macro business. As a result, we will no longer offer residential loan trading, GNMA [government national mortgage association], CMBS [commercial mortgage-backed securities] or CMO [collateralized mortgage obligation] products.”
In Brazil, the bank’s “markets capabilities will be delivered offshore by our New York and London teams, with a continued banking focus on Brazilian clients,” King says.
In addition to being the head of investment banking, King is also a member of the Barclays executive committee and chairman of the investment bank executive committee, officials say. He joined Barclays in December 2009 as head of EMEA banking and co-head of global corporate finance.
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