Barclays Capital is a rarity. It has been climbing the bond league tables, is consistently top of the European loans league tables, is nurturing a niche equities franchise, and its employees seem to like working there. “We’ve had just three managing directors leave us to join competitors in the last five years,” says Bob Diamond, Barclays Capital’s CEO. “And in that time 70 or 80 have joined us at that level.”
What’s more, it’s even managing to build a business in the US, and is making a profit while doing so. “Whether in absolute terms, or by return on risk-adjusted capital, we’re a very profitable institution,” says Diamond. “And we have the lowest cost-income ratio in our peer group.”
For all this, Euromoney still baulks at giving Barclays the award for best investment bank. It’s partly a matter of geographic clout: it is improving its US standing, but with 35 mandates as lead manager in 2002 there is still some way to go. It ranked fourth for private placements, though, and is a solid credit card ABS underwriter.
Second, though, while we could heavily discount the lack of an M&A business over the past 12 months, the lack of an equities mandate still counts against it.
We’re not arguing that Barclays Capital needs to have a full-service equities operation to be a successful investment bank. But our awards are for service to clients, and equity investors and hedge funds still need the services a cash equities franchise can provide even when equity capital markets are as lacklustre as over the past two years.
We have given Barclays Capital the award of best specialist investment bank to recognize its franchise in debt markets and risk management.
It finished 2002 in fifth place for all global debt – across bonds and loans – second for all European debt, and third in the European corporate bond market. It’s taken a lead role in several of the most high profile deals in Europe of the past 12 to 18 months, such as the e7.3 billion multi-tranche, multi-currency inaugural bond issue for E.ON, and Petronas’ first euro deal, for e750 million. And it has one of the top ABS desks in Europe. It was a bookrunner on HBOS’s £3.5 billion ($5.8 billion) residential mortgage deal, for example, as well as the Aeroporti di Roma e875 million and £215 million securitization for Romulus Finance.
Diamond’s team have formed their business around a formidable risk-management advisory and execution operation. As a result, Diamond refuses to regard his bank as a shop hawking bonds and loans. It is instead, he says, all about “serving our clients’ needs across capital raising and risk management”.
That doesn’t just mean doing the interest rate or foreign exchange swap on a bond. It’s where the investment bank’s equities ambitions come into play. Diamond isn’t looking to build a full-service cash equities machine, rather “a niche that is strong and growing”. The firm has an equity prime brokerage operation, and both an equity derivatives and equity-linked business that it has been expanding this year. In April, for example, the bank hired Maurits Schouten, formerly global head of equity derivatives trading at CSFB, as its new head of equity-linked bonds. Last month Barclays Capital was co-bookrunner with Crédit Agricole Indosuez Lazard on a e295 million convertible for French company Essilor. That’s an intriguing mandate for a firm with no cash equities business to win. It shows that a specialist investment bank can still operate across a lot of markets.
