By Paul Clarke
Of Financial News
Barclays PLC is making a fresh push into prime broking after
rivals retreated in the wake of steep losses from the collapse of
family office Archegos Capital.
The U.K. lender is hiring staff and aiming to grab market share
in prime services as part of a broader expansion of its stock
trading business, according to co-head of equities at Barclays,
"We view prime services as a big opportunity and are investing
heavily in the business," he said. "We're expecting to grow market
share, and in order to provide the same level of client support, we
need to continue to expand our resources to support that
Banks' prime broking units, which provide services to hedge
funds and family offices, were shaken by the collapse of Archegos,
which was run by hedge fund Tiger Global alumni Bill Hwang. Its
demise has cost banks hit by the crisis a total of $10 billion
Credit Suisse Group AG was hit hardest by the blow up, losing
$5.5 billion on the back of what an independent report into the
incident described as a "lackadaisical" attitude to risk. On Nov.
4, the Swiss bank unveiled plans to largely close the unit, which
executives said relied too heavily on leveraged bets that yielded
little profit. The closure will cost Credit Suisse another $500
million in revenues next year, its chief financial officer, David
Mathers, said during its investor day.
Nomura Co., which was the second-hardest hit from Archegos'
demise with a $2.9 billion loss, is also pulling back from prime
broking. The three biggest prime brokers--Morgan Stanley, Goldman
Sachs Group Inc. and JPMorgan Chase & Co.--have all indicated
their intention to maintain or grow the units.
"Clients tell us they don't want to be too concentrated with any
one bank, and they also see the benefit of diversifying with a
European bank," said Mr. Leech.
In Europe, Barclays is the fifth largest prime broker, with 15%
of the market, according to data from Preqin, behind Morgan
Stanley, Goldman Sachs, JPMorgan and UBS Group AG.
"The impact of Archegos has been a concentration of the prime
broking business in the top three banks, which have balance sheet
and risk appetite," said Youssef Intabli, head of equities at data
provider Coalition Greenwich. "But I think there will be a
redistribution of those balances over the next six to 12 months to
avoid too much exposure to the major banks and this is an
opportunity for European banks and smaller U.S. players."
BNP Paribas S.A. is also expanding its prime services unit. It
has already taken on Deutsche Bank AG's shuttered prime services
division, and has now struck an agreement with Credit Suisse to
funnel its clients across to the French bank.
Barclays' push into prime broking is part of a broader expansion
of its equities business, said Mr. Leech, who was promoted to
co-head of global equities at the U.K. lender in May alongside
U.S.-based Todd Sandoz after Fater Belbachir left to join
Employee numbers at the unit have increased by around 10% this
year, and it has made key hires including Christian Treuer as
co-head of equity derivatives distribution in Europe, the Middle
East and Africa, Spyros Varoutsis, who joined from JPMorgan as head
of flow derivatives and delta one, and Peter Ward, who leads
electronic trading. In New York, Bill Bors and Scott Rice joined in
senior roles over the summer.
Barclays had a 5.5% share of the global equities market in 2020,
according to figures from Coalition Greenwich, up from 3.8% five
years ago. After a record first half of 2021, revenues within its
equities unit have increased by 28% to 2.5 billion pound ($3.33
billion) so far this year.
Earlier in November, Barclays revealed that Jes Staley, its
chief executive who had spearheaded an expansion of its investment
bank in the face of activist pressure, was stepping down after six
years at the helm over an investigation into his ties with
convicted sex offender, Jeffrey Epstein.
His replacement, C.S. Venkatakrishnan--known as Venkat--has
already signaled a continued focus on Barclays' investment bank.
Leech said that its equities unit was set for continued expansion
"After substantial growth in 2021, we've identified areas for
expansion next year," he said. Mr. Leech added that hiring is
becoming more challenging amid a boom time for investment
"The competition for talent is as intense as I've ever seen it,"
Mr. Leech said. "We want to stay ahead of that as much as
possible--defend against attrition and adding key people in the
right areas. We're on a growth trajectory, and are aiming to
increase market share, which is attractive to a lot of people."
(END) Dow Jones Newswires
November 25, 2021 08:59 ET (13:59 GMT)
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