Barclays Stock Surges With Investment-Banking Rebound
By Simon Clark
Barclays PLC's stock has long been stuck in the mud, but so far
this year it is zooming ahead of the likes of JPMorgan Chase &
Co. and Morgan Stanley.
Shares of the London-based lender have risen 28% this year,
making it one of the best-performing investment-banking stocks and
taking it briefly above its pre-pandemic level. JPMorgan, by
contrast, is up 19%, and Morgan Stanley has risen 18%.
Spurring the recovery is a surge of activity in the U.K.
lender's investment-banking arm. It is a vindication for Chief
Executive Jes Staley, who has clung to the idea that a robust
investment bank complements Barclays's traditional British banking
"He had a lot of pressure to do more to shrink the investment
bank for a number of years and resisted that," said Christopher
Cant, an analyst at Autonomous Research, a unit of
AllianceBernstein. "That's to his credit."
Quarterly results from rivals Goldman Sachs Group Inc. and
JPMorgan this week point to another strong quarter for investment
Revenue from Barclays's markets unit, which trades fixed-income
securities, equities and derivatives, rose 45% to GBP7.61 billion
in 2020, equivalent to $10.4 billion. That activity appears to have
continued this year. In the first quarter, Barclays ranked seventh
among global investment banks in terms of revenue, one place behind
Credit Suisse Group AG, the highest-ranked European bank, according
Barclays was the top adviser on mergers and acquisitions by
North American insurance underwriters in the first quarter, working
on deals including Apollo Global Management Inc.'s $11 billion
takeover of Athene Holding Ltd., according to S&P Global
Barclays also has a U.S. credit-cards unit which stands to
benefit as businesses reopen, according to analysts.
One attraction for investors is that Barclays has built up
excess capital. The bank announced a GBP700 million share buyback
in February after its common equity ratio rose 1.3 percentage
points. Jefferies analyst Joseph Dickerson, who rates Barclays his
top buy call in the U.K., thinks the bank can afford to repurchase
GBP8 billion of stock in the next three years, equivalent to about
one-third of its market value.
"Barclays has a fairly unassailable capital base and this is
starting to become better appreciated by the investment community,"
Mr. Dickerson said. "Remember, this is a bank that raised equity in
2013, under prior management, and then had to undertake a fairly
Also helping Barclays has been the U.K.'s economic reopening
from the pandemic. The U.K. began to relax public-health
restrictions this week and remains on course to fully reopen its
economy by the summer. Almost half the population has received at
least one dose of vaccine.
Shares of Lloyds Banking Group PLC and NatWest Group PLC have
risen more than 17% in 2021. The benchmark FTSE 100 index is up
To be sure, investment banks can generate sudden significant
losses. Mr. Staley has faced criticism from activist investor
Edward Bramson, who has argued the investment-banking unit should
be scaled back. Mr. Bramson, whose Sherborne Investors owns about
6% of Barclays, declined to comment.
A case in point is Barclays competitor Credit Suisse. It said
April 6 it would take a $4.7 billion hit from the meltdown of
Archegos Capital Management -- an amount greater than its profit in
all of 2020.
While investors have pushed up Barclays's valuation, its shares
still trade for around 60% of its book value, a balance-sheet
measure of its net worth. The bank's big U.S. rivals trade well
above book value.
And in a troubling moment Wednesday, Barclays shares briefly
dropped 10% before recovering. Traders pointed to a so-called fat
finger human error.
To help guard against surprise losses, Barclays in September
appointed C.S. Venkatakrishnan as co-head of investment banking,
with responsibility for global markets. He had previously served as
chief risk officer since 2016, when he joined the bank from
JPMorgan, where he spent several years as head of operational
"Having a former head of risk as co-head of investment banking
might reap rewards," Jefferies's Mr. Dickerson said. "Risk should
be fully integrated into decision-making about the markets business
because it's very easy to print revenues but it's also very easy to
Write to Simon Clark at email@example.com
(END) Dow Jones Newswires
April 15, 2021 05:44 ET (09:44 GMT)
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