Q1 bank results: Barclays ticks all the trading bingo boxes

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By:
Jon Macaskill
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Former investment bank head Tim ‘Danger’ Throsby sadly isn’t at the firm to see the team he built deliver in a crisis.

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Has Barclays' CEO Jes Staley managed to quieten the naysayers with the latest results?


Barclays announced strong first-quarter trading results on Wednesday, with the biggest percentage increase in markets revenues of the leading investment banks.

Fixed income revenue rose by 106% compared with the first quarter of 2019, on the back of growth in both macro products, such as rates and FX, and credit trading. Equities revenue was up by 21% on higher equity derivatives volumes.

Fixed income is the biggest sales and trading group at Barclays, so strong performance across debt instruments was enough to drive a 77% increase in revenue for its global markets division to £2.42 billion.

UBS unveiled a 99% rise in its fixed income revenue on Tuesday, compared with the first quarter of 2019, which was close to the Barclays increase in percentage terms.

However, UBS has scaled back its presence in debt trading, and its $889 million of fixed income revenue this quarter was little more than a third of the $2.35 billion equivalent generated by Barclays.


The rise in rates and FX revenue may also help to mute any lingering criticism of the appointment of Michael Lublinsky 

Deutsche Bank on Wednesday said its first-quarter debt sales and trading revenue was €1.9 billion, or the equivalent of $2.07 billion, so Barclays has now taken the position of leading European fixed income house by revenue, as well as outpacing bigger US banks in quarterly percentage growth terms.

The strong trading performance helped to offset concern about likely future credit provisions due to the coronavirus crisis at Barclays.

It may help to buy some time for Barclays chief executive Jes Staley, as he attempts to fend off activist investor Edward Bramson, who is pushing for Staley to be replaced and for a reversal in the policy of pursuing market share in corporate and investment banking.

Retrospective vindication

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Tim Throsby, 'gardening'

Wednesday’s results also provide some retrospective vindication for Tim Throsby, who was hired by Staley in 2017 to increase investment banking revenue, then fired a year ago after the two men fell out over details of reporting lines.

Throsby’s old-school approach to building market share – hire experienced trading veterans and give them more money to play with – was a dangerous strategy, as it involved increasing risk-weighted assets when many peer banks were trying to cut exposure.

This played into the criticism by Bramson that the investment bank at Barclays was effectively a “black box with too much leverage”.

However, for the most recent quarter, the team assembled by Throsby managed to deliver in all main areas at once.

The performance in the credit unit managed by Barclays veteran Adeel Khan seems to have been a key differentiating factor.

Deutsche Bank, like most of the US firms that reported in mid-April, said on Wednesday that fixed income growth was achieved because rates and FX rose enough to counter the effect of what the firm described as “significantly lower revenues” in credit.

Barclays, by contrast, said that both macro products and credit drove growth.

The rise in rates and FX revenue may also help to mute any lingering criticism of the appointment of Michael Lublinsky as head of macro for Barclays.

When Lublinsky joined in November 2017, some wondered whether hiring a former trader with hedge fund Brevan Howard sent the wrong signal when many banks were promoting a return to more client-oriented markets businesses.

Lublinsky had been preceded by another Throsby hire in the form of Stephen Dainton, who was appointed head of equities at Barclays in September 2017.


An equities veteran might not seem an obvious choice to run a markets division that is still dominated by fixed income revenues 

Dainton’s background was in equity sales at Credit Suisse, where he rose through the ranks in a period when the bank was number one for global equity revenue, before surrendering market share to Morgan Stanley and other US firms.

Last April, Dainton became what seemed like an accidental beneficiary of the falling out between Staley and Throsby.

Staley announced that he would take personal charge of the investment bank in the wake of Throsby’s departure and gave fellow JPMorgan veteran Paul Compton operational responsibility as president of the unit that includes the investment bank at Barclays.

However, Dainton was soon afterwards promoted to global head of the markets group that delivered today’s strong results.

An equities veteran might not seem an obvious choice to run a markets division that is still dominated by fixed income revenues, and there was an odd interlude last year when Dainton was branded the “interim” markets head.

Equities group

The equities group at Barclays also performed well in the most recent quarter, with growth that was in line with sector leader Morgan Stanley and Dainton’s former firm Credit Suisse.

Barclays inherited a New York-based flow equity derivatives business when it took over the US operations of Lehman Brothers after the 2008 crisis.

In June, Dainton hired Fater Belbachir as head of equities for Barclays, and the addition of the former head of volatility trading at JPMorgan presumably helped to boost revenues in the current environment of high equity derivatives volumes and wide bid/offer spreads.

Throsby, the guy who put the trading band together at Barclays, is currently listed on LinkedIn as 'gardening' in London, just over a year after he was dismissed by Staley.

It isn’t clear whether he is pining for a return from unplanned gardening leave, or whether potential employers would want to hire someone to build a trading business.

Throsby’s former bosses at Barclays – in the form of Staley and finance director Tushar Morzaria – were keen to stress to analysts that the sales and trading boom that is partly offsetting problems in other parts of banking has continued in the first month of the second quarter of 2020.

So, there might be some interest in reviving markets activities that had seemed almost moribund at other banks.