Barclays had a touch of Goldman Sachs about it in the first quarter. Following questions about the wisdom of CEO Jes Staley's strategy of focusing on the investment bank, Barclays' bankers and traders had a stunning three months to March - much like Goldman Sachs after its struggles in 2017. Like Goldman Sachs, Barclays has been doing some big hiring.
The chart below illustrates Barclays' traders achievements. In equities, revenues were up 28% year-on-year, in line with U.S. banks like J.P. Morgan and Morgan Stanley. In fixed income currencies and commodities (FICC), they were down 2%, which was better than the likes of Citi and BofA. In sales and trading, Barclays is looking more like a U.S. bank than its fellow Europeans. Barclays doesn't break out separate figures for M&A, equity capital markets and debt capital markets, but across banking as a whole it had its best quarter ever. This was all achieved despite, the strengthening pound, which eroded revenues in the U.S. business when converted back to sterling for reporting purposes.
Barc's first quarter success even extended to the thorn in Staley's side that is the return on equity in the investment banking division. This rose from 8.2% in the first quarter of 2017 to 13% in the opening months of this year. At Deutsche Bank, meanwhile, the return on equity in the corporate and investment bank in the first quarter was just 1.5%. At the same time, profits at Barclays' corporate and investment bank were up 49% year-on-year, helped partly by the recategorisation of some costs in the head office (without which they would still have been up 45%) and by the 12% decline in the dollar (which made U.S. bankers cheaper).
With activist investor Edward Bramson lurking in the background, talking about culling the investment bank, Staley and investment bank CEO Tim Throsby needed to pull rabbits out of hats. In the first quarter, they seemingly did just that.
Barclays' Q1 success came after Throsby promised to reinvigorate an appetite for risk-taking in the investment bank and to increase its allocation of risk weighted assets. There was little sign of the latter in the first quarter - RWAs remained almost static at around £181bn year-on-year in the first quarter. It came too after Throsby indulged in some heavy hiring at the investment bank in 2017: 40 managing directors (MDs) were added to the banking and markets business last year, including Stephen Dainton, the ex-Credit Suisse banker who now manages the global equities business.
Barclays said today that it continued hiring in the first quarter. Another six MDs were added to the markets business. Another five senior equity researchers were added in Europe and the U.S. (proving that excellent content creators are in demand after MiFID II). Meanwhile, Barclays cleared out 100 existing directors and managing directors in January. If this is upgrading, it seems to work.
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