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The Nomura ghost that haunts Barclays investment bank

If you leave Deutsche Bank now, there's another European bank that could be at the front of the queue to hire you: Barclays. Former Deutsche Bank staff are turning up in many places, but it might easily seem that they are turning up at Barclays especially.

Barclays' most recent DB recruits include Vanessa La Santa, Deutsche's former head of EMEA markets compliance, who arrived in July 2019. Throughout the year, Barclays has been picking over Deutsche's investment banking division, with hires including Alastair Blackman, Deutsche's former head of media and digital investment banking for EMEA; Simon Denny, Deutsche's former head of corporate finance in South Africa; Riaz Ladhabhoy, a former DB internet banker; and Kristin DeClark, who joined in March as co-head of U.S. ECM.

Deutsche people are also dotted around Barclays' markets business. The markets division has done less hiring in 2019 following the exit of Tim Throsby, but it recruited Gerald Toledano from Deutsche as global head of funds and equities solutions last November, plus Jeremy Monnier, who joined from DB as global head of structuring in September 2018, and Bilal Kahloon who came with an apparent mandate to build out Barclays' credit financing business. 

Whether Barclays is really targeting DB is open to question though. It's closer to the truth to say that Barclays has been targeting everyone. And that this was especially the case in the past few years. 

Barclays no longer boasts about all the people it recruited, but before Throsby left in April 2019, the bank routinely highlighted all its new hires along with its second quarter results. In February 2019, for example, Barclays said it had hired "over 50 managing directors" in its markets division since 2017, plus another 30 in its investment banking business over the same period. With the average material risk taker at Barclays earning $1.4m last year, and with most managing directors being material risk takers, it's likely that all this MD recruitment cost Barclays $100m+.

And now? MD hiring is continuing at Barclays in 2019, albeit at a less pacy rate. Barclays hired Fater Belbachir as head of global equities from JPMorgan in June, plus Taylor Wright from Morgan Stanley to head U.S. equity capital markets. Bryce Taylor, a top trader from Citigroup in NY, joined in July. In May 2019, Reuters reported that Scott Eichel, a veteran securitized assets trader hired from the street in August 2018, was assembling a team and leading a renewed push into the U.S. mortgage-backed securities market.     

Barclays declined to comment for this article. However, some at the bank are understood to be worried that recent years' hires will prove unsustainable. After all, Barclays isn't the only bank to have gone on an hiring spree and then had second thoughts: Nomura did much the same thing before announcing an almost complete reversal of its strategy in April 2019. 

Officially, Barclays insists its bankers and traders (and especially its equities traders) have nothing to worry about. When Barclays' CEO Jes Staley spoke to the Financial Times last weekend, he said further cuts to the trading division are not the answer and that the bank could even re-enter the Asian cash equities trading business it exited in 2016.

Staley might well be right. Although the return on average allocated tangible equity at Barclays' corporate and investment bank was down to 9.3% (from 11.0% a year earlier) in the first half of 2019, Barclays' costs look under control. Market intelligence firm Tricumen put Barclays above its peer group in terms of operating costs/income for both equities and FICC trading in charts issued earlier this week. Tricumen said too that Barclays gained share in both banking and fixed income trading in the first half. However, equities revenues at the bank were down 17% year-on-year, and despite recent years' investment KBW says Barclays' equities trading market share has been largely stable since 2017.

This is why there are rumblings. It doesn't help that 'corporate raider' Edward Bramson remains in the background, demanding that the investment bank is overhauled and new chairman Nigel Higgins is said to be keen to see profitability rise. Barclays cut 3,000 jobs in the second quarter of 2019 and is reducing bonuses. Some of those who've left the bank voluntarily in recent months, including Fabio Madar, are understood to have done so because the environment turned out to be less growth-oriented than at the time they were hired. "Barclays has hired a lot of senior people to build out its business, but it's not clear it will go through with that intent," says one headhunter, speaking off the record. "The last place that did this was Nomura under Fred Jallot."

A recently ex-senior Barclays banker in the U.S. says some people at the bank are worried. "They've been cranking the equities business for five years in a rising market with very little result, so what happens if - God forbid - that market goes down?" He suggests that Barclays is over-reliant on macro and credit trading, both of which are struggling in a low interest rate environment. "If the tide went up and your boat still wouldn't float, it doesn't bode well for when the tide changes."

Photo by Luke Southern on Unsplash

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AUTHORSarah Butcher Global Editor

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