Barclays and Nomura are adoptive parents to children of the same fractious family: both acquired parts of Lehman Brothers and both used their acquisitions to bolster their investment banking presence internationally. Today, both reported their quarterly results.
Barclays' are arguably the more interesting of the two as they mark the bank's first disclosure since John McFarlane dispensed of Antony Jenkins as CEO. However, Nomura's results provide an interesting juxtaposition to Barclays', particularly if you're thinking of joining either bank's sales and trading business.
1. Barclays may have been hiring quietly, but it's not hiring at all publicly
Is Barclays hiring? A look at the UK's Financial Conduct Authority register suggests it is, quietly. Publicly, however, Barclays' investment bank looks to be in recruitment lock down. The bank is only advertising two 'investment banking jobs' on its website and neither of them are really for investment bankers. - One is for a technical specialist in Pune and one is for a corporate banker in New York...
Instead of hiring, the emphasis at Barclays is on 'efficiencies'. Barclays investment bankers can expect to work more closely with corporate bankers in future: "We believe there are untapped commercial banking opportunities with investment banking clients," said McFarlane in his speech today.
2. Nomura's holding headcount stable too
Nomura's not hiring wildly either. The Japanese bank revealed today that headcount increased by seven people in Europe between March and June 2015 and fell by 10 people in the Americas. This seems to mark an end, therefore, to Nomura's policy of bulking up in the Americas. Right now, the Japanese bank is advertising six investment banking and markets jobs outside Asia, including one for a vice president in TMT investment banking and one for an associate in business services equity research, both in London.
3. Barclays is still cutting headcount in the investment bank
Barclays hasn't finished trimming staff from its investment bank. In today's strategy presentation, finance director Trushar Morzaria said the bank will be making headcount reductions that are 'primarily IB front office restructuring'-related. The bank wants to get its cost income ratio down to 50% from 70% across the group in the first half. The cost income ratio in the investment bank was 64% in the three months to June, down from 74% one year earlier.
4. Barclays is 'optimizing its IT platform' - and spending more money on contractors in the process
As part of Barclays' attempt to cut costs, it's optimizing its IT platform and automating processes. McFarlane said it's also eliminating bureaucracy by 'decentralizing relevant activities back into the business from the centre.' All of this seems to be good news for IT contractors. Contractor costs rose 20% at Barclays in the first half.
5. Nomura's fixed income engine faltered, but equities fired ahead
Nomura's fixed income sales and trading business used to be great. Suddenly it's faltering, while the bank's equities business is forging ahead.
Net revenues at Nomura's wholesale bank:
6. But Barclays' macro trading business is the only thing doing well
While Nomura's fixed income trading business stumbles, Barclays' is doing strangely well. McFarlane said the bank has increased market share in its macro business (FX and rates). By comparison, and as predicted, Barclays' two areas of strategic focus - investment banking advisory and equities - did very badly.
In equities, the bank said this was due to the lingering impact of the dark pool scandal. No explanation was given for the poor performance in banking - we'd suggest it might be due to the lingering impact of Skip McGee's exit.
Revenues at Barclays investment bank:
7. Barclays is accruing higher bonuses for 2015, Nomura probably isn't
Given that Barclays is cutting front office headcount, the bonus prognostication at the bank looks pretty good. Accrued bonuses across the bank were up 6% year-on-year in the first half. However, the cost of paying deferred bonuses from previous years is down 18%...
At Nomura, things don't look so cheery. Compensation and benefits across the bank were down 8% year-on-year in the most recent quarter...
8. Barclays' investment bank is mostly about Europe, and then America, and then Asia. Nomura is mostly about America and Japan, and then Europe and then the rest of Asia
Over the past few years, there's been some confusion over Barclays' geographical focus. First it was building up in Asia, then it was pulling back. Next, it was focused on the US business, where its strategically important equities and investment banking businesses are based.
Today, John McFarlane firmly reoriented Barclays investment banking business towards Europe (where the successful macro trading business is coincidentally based). "The centre of gravity [for the investment bank] remains North America and Europe, principally the UK, with an important contribution from its global network, including Asia. This geographic balance is likely to remain the same going forward," said McFarlane.
At Nomura, by comparison, it's mostly about Japan and America. As the chart below shows, Nomura's EMEA business isn't doing too well - except in equities. Maybe the bank's rates traders would like to move to Barclays instead?