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Barclays has unveiled a strategy aimed at enhancing returns in its investment bank by concentrating on advisory and equity capital markets while reducing reliance on debt underwriting.
Taylor Wright and Cathal Deasy, who jointly lead Barclays’ investment bank, presented to analysts on Tuesday, outlining their goal to increase income by £700mn by 2026.
“Our investment banking fees are overly dependent on balance sheet-driven products,” stated Wright.
While Barclays generates revenue in the same markets as top five US competitors, it relies more heavily on the capital-intensive debt capital markets, according to Wright.
“Our 54 percent revenue share from [debt capital markets] compared to their 38 percent indicates that we are generating revenue in a less capital-efficient manner,” he said.
The duo has been charged with enhancing the investment bank’s profitability as Barclays CEO CS Venkatakrishnan pushes for a reduction in the division’s share of the group’s risk-weighted assets from 58 percent last year to 50 percent by 2026.
Barclays’ share of global fees declined by over 1 percent between 2019 and 2023, with the debt capital markets segment contributing to last year’s drop in fee income, signaling the bank’s exposure to this business.
Wright and Deasy’s strategy aligns with Venkatakrishnan’s earlier outline, which emphasized reallocating resources towards more lucrative business areas and capturing greater market share in advisory.
The division is also set to enhance its corporate lending and transaction banking services in the US, where its international corporate bank currently earns less than 10 percent of its income despite having 40 percent of its priority clients located there.
Since Wright, formerly of Morgan Stanley, and ex-Credit Suisse banker Deasy were appointed co-heads in 2023, the investment bank has seen several structural changes.
These adjustments have involved integrating certain business lines into the investment bank and appointing new leaders for key industry sectors, including David King, a former Bank of America technology banker, and Martin Douglass, a financial sponsors dealmaker from Morgan Stanley.
The bank is particularly focused on increasing business volume from investment banking clients who currently borrow but do not utilize additional services, as these clients significantly contribute to risk-weighted assets.
“Approximately one-quarter of investment banking lending RWAs are linked to clients using one or no supplementary products beyond the loan, typically resulting in returns that are insufficient,” stated Wright. “Our objective is to achieve higher returns on a sustainable basis.”
This article has been updated to clarify that Barclays’ international corporate bank generates less than 10 percent of its income from the US, rather than its overall investment bank.