Barclays Investment Bank Boss Vows to Restore 'Commercial Zeal'

  • Throsby wants staff to ‘step up’ for clients, take more risk
  • Lender is redeploying resources from lending to trading desks

Barclays Plc’s investment-banking boss, Tim Throsby, says he plans to reignite “commercial zeal” within the firm’s worst-performing unit, ending five years of risk-averse retrenchment that’s left traders trailing U.S. rivals.

When he arrived at Barclays from JPMorgan Chase & Co. in January, Throsby found it was “very clear” staff had lost “a suitable focus on opportunities to deploy risk,” according to remarks he made at Bank of America Corp.’s financial conference in London on Tuesday. “Risk taking as a positive element of servicing our client base should always be central.”

Tim Throsby

Source: Barclays Plc

Throsby’s comments signal a change in tone at Barclays, which since losing former Chief Executive Officer Bob Diamond due to the Libor-rigging scandal in 2012 had been keen to emphasize the less controversial and more profitable consumer parts of its business. Current CEO Jes Staley, also a former JPMorgan dealmaker, faced down calls from investors to spin off the investment bank early in his tenure, embarking on a recruitment drive from his former employer, and recently hiring high-profile hedge fund traders.

“We have disappointed the market and our shareholders in delivering on some of the recent revenue expectations,” Throsby said at the conference, one of the key events for executives outlining their plans to investors. “We’ve been shy in talking about the investments that are necessary to deliver what we think are very attractive improvements in our returns.”

Read More: European Bank Trading Slump Worsens; U.S. Rivals Gain Share

Staley has repeatedly said he wants to keep a “bulge-bracket” investment bank capable of competing with the best on Wall Street, and his gamble is showing early signs of paying off. The division performed better than expected in most areas in the second quarter and posted a return on tangible equity above 10 percent for the first time under the current CEO.

Stepping Up

“One of the reasons our market share has come back a little is that we were not stepping up in the right way for our clients” previously, Throsby said. “Because of that, sometimes they went to other banks when they would have usually come to us. We need to remedy that.”

Throsby said he wants to “sweat our balance sheet and capital” in order to keep returns in the double digits and said he was redeploying resources from corporate lending to trading activities where the returns, and risks, are higher. Other areas he’s earmarked for growth are leveraged finance, electronic foreign exchange and equities platforms, and corporate derivatives.

“Over time we are likely to grow, on a highly targeted basis, our Markets risk-weighted assets, both absolute and relative to the lending balance sheet,” he said, referring to the unit that houses its traders. Throsby said his ambition is to move up a rung in the global ranks of trading businesses.

Recent Struggles

Barclays’ markets unit was the eighth-largest trading operation at the end of the second quarter with a 6.2 percent share of revenue, according to Bloomberg Intelligence data. The lender’s nearest rivals are Deutsche Bank AG and Credit Suisse Group AG, which each control 6.7 percent, while Goldman Sachs Group Inc., the next biggest, has a 12 percent share, the data show. 

Barclays has struggled in some of the areas where Throsby wants to expand. Revenue at the so-called macro unit, which deals in products tied to foreign exchange and interest rates, slid 14 percent in the first quarter, even as competitors Citigroup Inc. and JPMorgan reported gains. It then tumbled another 25 percent compared with the year-earlier period in the three months that followed because of “subdued market volatility,” company presentations show.

Staley and Throsby have since moved to repair the damage. In June, they hired Chris Leonard, founder of hedge fund Arcem Capital, to run the U.S. rates unit, a division executives blamed for the first-quarter slump. Earlier this month, they hired Michael Lublinsky from Brevan Howard Asset Management to head the business globally.

Barclays also added Herve Gallo from Tyrus Capital to run European derivatives trading and Anthony Bray from hedge fund Pelham Capital Management to trade financial stocks.

“At heart is a renewal of the commercial zeal of the organization, a hunger to serve our clients and deliver for our shareholders,” Throsby said in his speech at the conference. “Good conduct and culture and controls and governance are vital, not as a substitute for commercial success, but rather as the foundations for safe and efficient operations and growth.”

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