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Barclays Sees Middle East Fee Rebound as Region Escapes Cuts

Barclays Plc CEO Antony Jenkins
Barclays Plc announced global job cuts and a plan to cut costs last month as Chief Executive Officer Antony Jenkins revamps the lender after its $436 million fine for interest-rate manipulation and first annual loss in two decades. Photographer: Chris Ratcliffe/Bloomberg

March 4 (Bloomberg) -- Barclays Plc, which is cutting 3,700 jobs as it reduces costs by $2.6 billion a year, said it plans further expansion in the Middle East and North Africa on rising demand for wealth management and investment banking services.

Barclays, which employees about 1,000 people in the region, expects to hire about 100 more this year and has a “healthy pipeline” of debt capital market and M&A deal mandates, John Vitalo, the bank’s Chief Executive Officer for the Middle East and North Africa, said in an interview in Dubai on Feb. 27.

The London-based bank announced global job cuts and a plan to cut costs last month as CEO Antony Jenkins revamps the lender after its 290 million-pound ($436 million) fine for interest-rate manipulation and first annual loss in two decades. In the Middle East, Barclays plans to hire in wealth management, investment banking and retail, and Vitalo said he’s “cautiously optimistic” on the fee pool for capital markets and advisory.

“This region is one of the world’s few macroeconomic bright spots and we’re fortunate to be in a position to take advantage of that,” Vitalo said. “The 3,700 job cuts Anthony referred to are not targeted at the Middle East.”

Banks Hiring

Barclays is among investment banks hiring after Europe’s debt crisis led firms including Credit Suisse Group AG, Nomura Holdings Inc. and Morgan Stanley to trim their presence in the Middle East and North Africa. Economic expansion and high oil prices are driving prosperity in the region. Private wealth in the Middle East and Africa may rise 6.6 percent annually to $6.1 trillion in 2016 as the region’s oil-rich economies continue to prosper, the Boston Consulting Group said in June. Wealth in the region increased to $4.5 trillion last year, up 4.7 percent from $4.3 trillion in 2010.

“That personal wealth is a great opportunity for our wealth management business, but also in the U.A.E. for retail banking which is focused on the affluent sector,” he said. “There’s opportunity just about everywhere we look.”

Vitalo said the fee pool in the Middle East is recovering after falling “consistently” from its peak between 2007 and 2008 and he’s “cautiously optimistic” on its growth for 2013.

Barclays has reviewed 75 of its units to weed out those that pose a reputational risk or don’t make profits. The firm will shut about four that consume about 90 billion pounds of assets and may close a further 17 that generate about 2 billion pounds of income, Jenkins told reporters in London on Feb. 12.

Barclays declined 1.6 percent to 298.55 pence as of 11:15 a.m. in London and has gained about 15 percent so far this year.

Positions Going

About 1,800 positions will go this year at the firm’s investment bank and 1,900 in its loss-making European consumer and business banking unit, Barclays has said. The bank also plans to scale back the investment bank’s Asian and European equities business, reversing an expansion that followed its 2008 purchase of Lehman Brothers Holdings Inc.’s U.S. unit.

Although Britain’s second-largest lender made “small amounts of trimming” across its corporate, retail, wealth management and investment banking divisions in MENA last year, it also hired more than 100 people in the region and plans to hire “about the same” number of people this year, Vitalo said.

The Middle East and Africa generated about 4.5 billion pounds of revenue for Barclays last year, about 16 percent of the total, according to the bank’s annual results. Net income for Barclays’ African unit Absa Group Ltd. dropped 13 percent to 8.39 billion rand ($926.6 million) last year as it was hit by real estate losses.

M&A Adviser

Barclays is the Middle East and Africa’s top merger and acquisition adviser so far this year, working on deals worth $11.6 billion, according to data compiled by Bloomberg. The bank is the region’s eleventh largest underwriter for bonds, according to the data. Barclays is acting as an international adviser on a plan by Egyptian construction and fertilizer company Orascom Construction Industries to transfer shares from Cairo and London to Amsterdam and also helped to arrange a $1.5 billion bond sale for Abu Dhabi Commercial Bank PJSC, the United Arab Emirates’ third-biggest bank, last week.

“If you look at the global environment it makes me cautiously optimistic on the growth of the investment banking fee pool in the region,” Vitalo said. “I don’t expect we’ll go back to 2007 any time soon but I’m optimistic that we saw the trough in 2011.”

To contact the reporter on this story: Stefania Bianchi in Dubai at sbianchi10@bloomberg.net

To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net

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