With the ascension of Antony Jenkins as Barclays‘ new chief executive, attention will inevitably fall to the part of the British bank that has grown the fastest in recent years: its investment bank.
Built from humble beginnings, specifically the debt operations of Barclays' BZW, the investment bank has become one of the firm's biggest profit centers. It was the darling of Robert Diamond Jr., whom Mr. Jenkins is succeeding and who resigned following the firm's $450 million settlement related to the fixing of the Libor interest rate.
Since arriving at Barclays in 1996, Mr. Diamond made it his mission to build out a world-class investment bank from scratch. But while he made headway over the years, the single most transformative event for Barclays was the firm's acquisition of Lehman Brothers‘ core American banking assets in the fall of 2008. Instantly, the British firm grew from respectable midtier adviser and lender to a major deal maker.
The combinati on of Lehman's advisory business with Barclays' balance sheet created a more formidable competitor to more established rivals like JPMorgan Chase and Goldman Sachs. In 2008, Barclays' investment bank - then known as Barclays Capital - contributed £1.3 billion pounds to the firm's overall profit. The next year, the division pulled in £11.6 billion.
Nowhere was the unit's growth more apparent than in the business of advising on deals. Between 2002 and 2008, Barclays never rose higher than 9 in Thomson Reuters‘ worldwide league tables, with an average market share of about 9.3 percent. From 2009 through Thursday, that figure leaps to 13.8 percent, with the firm ranking fifth, six, or seventh.
Some of that was driven by a more conscious use of Barclays' balance sheet to supplement its traditional dispensing of advice. Last year, the firm lent $13.3 billion to a longtime client, Kinder Morgan, to buy the El Paso Corporation for $21.1 billion. The loan wa s eventually dispersed among several lenders, but the bank's willingness to provide the initial financing up front helped provide speed, certainty and confidentiality.
“We've long had a big-boy M.& A. business,†Hugh E. McGee III, Barclays' head of investment banking and a Lehman veteran, told DealBook last year. “And now we've got a big-boy checkbook.â€
Barclays has been consistently strong in other businesses, such as debt capital markets, where the firm has ranked no lower than fourth since 2002.
But the firm still has room to improve in other areas: it has mostly come in fourth in Thomson Reuters' ranking of global equity capital markets bookrunners over the past decade, even after the Lehman deal.
Not all of the investment bank's gains have been met with plaudits, however. During Mr. Diamond's tenure, critics charged the firm with becoming a more rough-and-tumble bank with an eye squarely on the bottom line, creating what detractors have s aid is a culture that allowed lapses like the Libor scandal to take root. The American was memorably derided as “the unacceptable face†of banking by Peter Mandelson, a former Labour Party's business secretary
It's unclear what Mr. Jenkins has in mind for the investment bank, though he has already told Bloomberg News that he will “think strategically†about the business.
