Edward Evans is a managing editor with Bloomberg Gadfly. He is former managing editor for European finance at Bloomberg News.
Jes Staley, the new CEO of Barclays, isn't wasting time. Less than a week into the job, he reportedly approached former JPMorgan commodities chief Blythe Masters about taking charge of his British investment bank.
Her response? Thanks, but no thanks. In an emailed response to Bloomberg News after Reuters reported the approach, she said she's fully committed to her job at a New York startup that she only joined in March. Digital Asset Holdings provides banks with so-called blockchain technology, a ledger system that backs digital currencies such as bitcoin.
Getting the most senior investment banker working in the financial-technology industry would have been a coup for Barclays. That Staley was unable to lure his former JPMorgan colleague shows we've reached a turning point: that for financiers, the attraction of making a fortune in tech is now greater than the lure of running one of Europe's pre-eminent investment banks.
Masters has been years ahead of her industry before. Two decades ago, she helped develop credit-default swaps, creating a market that boomed and brought her bank immense profit. (It's also blamed by some for contributing to the financial crisis of 2008.)
Her polite rejection of Staley's overtures suggests one of the biggest opportunities in finance now lies outside the banks. That means helping them overhaul their ancient electronic payment systems and improving their clearing and settlement systems, for starters. It's also about disrupting the industry -- replacing banks as lenders and advisers.
The people, and the money, are following. Former Morgan Stanley and Citigroup CEOs John Mack and Vikram Pandit have invested and advised fintech businesses. Lloyd Blankfein says Goldman Sachs is a technology firm these days. Spain's Santander has started its own fund to invest in fintech firms.
The startup scene is particularly attractive. Rhydian Lewis, an ex-Lazard M&A banker, is CEO of RateSetter in London. Former BNP Paribas MD Sam Hocking is running AltX, a cloud-based analytics provider for hedge fund investors, while ex-UBS dealmaker Simon Adamiyatt has joined Earthport as CFO.
This is all happening as returns from investment banking dwindle in Europe. Return on average equity at Barclays's investment bank fell to 5.2 percent in the third quarter. That's well below the cost of equity for U.K. banks, estimated at about 9 percent by analysts. The stock trades at an almost 40 percent discount to book. These struggles come at a time when global fintech investments are booming, tripling to $12.1 billion last year, according to an Accenture study.
If Barclays was preparing to reboot its investment bank to take advantage of the huge technological shifts going on outside the company, Staley might have had better luck enticing Masters. Even if it was planning to expand the investment bank, or if becoming head of that business was a clear route to becoming CEO of Barclays itself, then he would have had a more attractive pitch.
As it is, it looks like Barclays is going to go on shrinking its investment bank. That means it's just not the most attractive place to work right now.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
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