(Bloomberg) -- Barclays Plc said it expects a raft of senior dealmakers it’s hired in recent months to become more productive in the coming year, which executives hope will help them boost returns at the company’s investment banking division.
While some of the managing directors that have joined the firm started producing revenue in their first year, it can take as long as 18 months for the company to begin seeing returns from new hires, according to Taylor Wright, who’s co-head of the business alongside Cathal Deasy.
Deasy and Wright have been remaking their division since their appointment in early 2023. The two have hired dozens of senior dealmakers across areas like technology and energy after the bank experienced a period of higher-than-usual attrition last year.
“What we were focused on was hiring in areas where we wanted to grow and rebuild a little bit,” Wright said at a presentation for investors on Tuesday. “It’s reasonable to assume for strategic products that it can take 12 to 18 months for somebody to become truly productive on the platform.”
Tuesday’s event offered a chance for Wright and Deasy to defend some of their early moves atop the division. The company has long faced questions from shareholders about the size of its investment bank, which also includes Barclays’ trading arm. That’s because the unit consumes more risk-weighted assets — a measure of capital — than any other part of the bank but it often produces some of the company’s lowest returns.
Deasy and Wright are looking to change that. The two on Tuesday reiterated that they’re aiming to increase their market share across investment banking to the roughly 4% the company last captured in 2019, which would be an increase from the 3% it held last year.
The company plans to do that, in part, by increasing its market share in equity capital markets and M&A advisory. It’s also seeking to win more transaction banking business in areas like foreign exchange and payments.
“This is a competitive business and nobody is shying away from that,” Deasy said. “What really gives us that confidence to be successful in the US, both on the M&A side and on the ECM side, is this is not a movie that’s new for Barclays. This is a movie that Barclays has seen before.”
‘Saying No’
Between 2019 and 2023, the average number of risk-weighted assets assigned to the investment bank soared 25% to £84 billion. At the same time, the ratio of income-to-RWAs, a measure of how efficiently the company is using that capital, declined 80 basis points.
Wright and Deasy said they quickly realized that far too many lending clients had just one or no other product with the bank. That meant very few clients were meeting the company’s internal requirements for profitability.
“If the hurdle rate is not met, we are saying no,” Deasy said. “And we recycle capital to higher returns elsewhere.”
There’s signs that their efforts are working: the ratio of income-to-RWAs has increased by about 100 basis points in the first six months of the year. Deasy and Wright have also been helped by an improvement in the investment banking environment.
The value of deals globally has risen about 16% in 2024 to $2.3 trillion, data compiled by Bloomberg show. That’s been helped by the biggest deal of 2024: snack maker Mars Inc.’s agreement to buy Kellanova for nearly $36 billion including debt.
Barclays now expects the industrywide fee pool to be about $80 billion this year, up from the $70 billion the company was expecting in February. That’s been spurred by an increase in activity in debt capital markets, especially by investment grade companies.
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