Awards for Excellence 2019
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In investment banking, the first quarter of this year capped a particularly difficult period in the markets; one that has hit Europe and European firms hardest.
The continued woes of Deutsche Bank and the cuts announced by the big two French banks in February encapsulated the difficulties, with Société Générale looking like it was finally admitting defeat, at least in fixed income trading.
But there are still a few European banks giving the US banks a run for their money, especially Barclays, western Europe’s best investment bank. This was a year when it became clear that Barclays’ strategy in investment banking could come good and that Europe – not just the UK – is a central part of that success.
The most obvious sign of this is the bank’s rise to be the top European investment bank by EMEA revenues in Dealogic’s investment banking league table for Europe, Middle East and Africa in 2018, when it replaced Deutsche, while also leapfrogging Bank of America Merrill Lynch in the ranking.
Barclays’ unusually strong position in the US market is a crucial part of its viability as a global competitor to the Americans in Europe as it is better able to bring European stories to US institutional investors. Its London base and UK commercial network make it hard to beat in Europe’s biggest investment banking market.
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| Reid Marsh |
Reid Marsh, head of banking for EMEA, is adamant that Barclays can take market share in countries such as Italy. The continental part of its European franchise might not be as profitable as the US or UK, but it is vital to its global proposition.
Barclays deserves applause for this determination. Yet there is a sense of urgency about boosting the investment bank’s returns and an even sharper focus on costs, including compensation. Its management realize that while its return on equity may be healthy, it needs to rise, which is why it has been so prudent about capital allocation.
It met its cost target a year early and Barclays ended this awards period beating peers by revenues for the sixth quarter, according to Berenberg. In the first quarter, although Barclays’ revenues in fixed income, currencies and commodities (FICC) were down 3%, its US peers saw revenues fall by about 10%.
Barclays’ corporate and investment bank’s rise in 2018 profit before tax was better than any big European or US rival. Moreover, it is advancing well beyond its core strength in debt – although it is developing that business, particularly in areas such as green bonds.
In M&A, it is one of only two diversified European investment banks in the top 10 for western Europe, according to Dealogic. It is one of the most active M&A advisers not just in the UK but also in countries such as Denmark, Finland, Greece and Ireland.
Even in equities, a much newer business for the bank, Barclays was one of the few to see strong growth in revenues in 2018. It has hired a slew of equity research analysts over the last year, as the new regulatory environment makes life harder for smaller firms. Its position on the IPO of Italian payments company Nexi, just outside our awards period, shows Barclays is still very much in the game.
