Finance

Barclays dealmakers post record quarter despite sharp fall in fixed income trading

Barclays investment bankers posted a record quarter despite a 40% slump in fixed income trading revenues as fees surged during an ongoing deal boom.

Profits within the UK lender’s investment bank were up by 51% to £1bn, with fees from mergers and acquisitions advice up by 160%. Fees across its traditional investment banking business increased by 19% to £873m during the second quarter — a new high for Barclays.

However, the bank could not follow rival Deutsche Bank by avoiding the second quarter slump in fixed income trading. Barclays made £895m in the unit, a slide of 39% as Wall Street peers posted an average decline of 43% during the three-month period.

Barclays’ equities trading unit also hit new highs, however, with a 15% rise to £777m during the second quarter.

“In [the corporate and investment bank], we are enhancing our ability to compete for client business with a stronger product and service set, from transaction banking to our equity franchise, alongside a build-out of our sectoral expertise in healthcare, technology and sustainability,” said Barclays chief executive Jes Staley in a statement.

The boom in deals has already lead to higher compensation costs at the bank, with variable pay across the bank increasing by 46% to £1.1bn.

Overall revenues at Barclays were £5.4bn, largely in line with analyst expectations, while pre-tax profits surged by over 600% to £2.5bn as provisions put aside for Covid-19 loan losses dropped. The bank released £797m in credit provisions during the second quarter, compared to a £1.6bn loss during the same period in 2020.

Investment banks have hauled in a record $60bn in the first six months of 2021, with record or near record periods for Goldman Sachs, JPMorgan, Morgan Stanley, Bank of America and UBS during the second quarter.

While the first three months of the year were dominated by the record issuance of so-called special purpose acquisition companies, which raise money on public markets to fund acquisitions, M&A bankers have come to the fore in the second quarter.

European rival UBS saw M&A fees surged by over 200%, while Deutsche Bank’s revenues in the unit more than doubled. Among Wall Street players, Goldman Sachs’ 83% gain was the biggest, with Citigroup (77%) and JPMorgan (52%) also enjoying sharp increases.

READ Barclays names new capital markets leaders in latest shake-up

Barclays has brought in new leadership at the top of its investment banking unit, and hired senior investment bankers across the US and Europe in a bid to gain market share from its rivals.

The UK lender installed Jean-Francois ‘JF’ Astier and John Miller as co-heads of its investment banking business as part of a raft of promotions of senior dealmakers into global leadership roles. It created a new management team for the unit, comprising 11 senior bankers, naming Kristin Roth DeClark and Taylor Wright as co-heads of capital markets.

In Europe, it promoted its head of M&A in the region, Pier Luigi Colizzi, to head of its European investment banking unit, while also hiring Ingrid Hengster and Laurent Meyer into senior leadership roles in the region. 

READ Barclays unveils raft of changes to top of investment bank

The UK lender ranks seventh in the global investment banking league tables for the first half of 2021 with $2.3bn, according to data provider Dealogic, the same position as last year. In Europe, the Middle East and Africa, it has moved up from seventh place in the first half of 2020 to fifth at the same point this year.

Staley said the bank was “happy with the talent that we have” when asked by journalists whether a further expansion of the investment bank was on the cards.

“We are very comfortable where we are. We are part of what they would have historically called the bulge bracket,” he said.

To contact the author of this story with feedback or news, email Paul Clarke

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