Barclays' equities problem: it lost the Lehmanites
Does Barclays have a problem with its equities business? At the very least, the bank's first quarter results suggest things aren't going well there: revenues fell 10% compared to the first quarter of 2016, a performance whose misery was exceeded only by equities at Credit Suisse (down 14%) and matched by Deutsche Bank. New investment banking CEO and ex-J.P. Morgan equities man, Tim Throsby, is due to take Barclays' equities business in hand, particularly in Europe, where Jes Staley noted in February that the bank remains a "new" player with room to grow. But what if Europe isn't the problem? What if it's the U.S?
Barclays' U.S. equities sales and trading business was bolted on from Lehman Brothers when Barclays rescued Lehman in September 2008. Lehman's equities business was already well developed and for a while, all went well. Then, however, came Antony Jenkins. Jenkins was Barclays' CEO between 2012 and 2015. During his comparatively short tenure, many of the big-hitting, highly-experienced Lehman equities bankers left. And they're leaving still.
In the past few months alone, we can report that Barclays' U.S. equities sales and trading business has lost David Siffringer, its head of U.S. equities distribution, David Bossolina, a managing director in equities sales trading, and Andrew Giobbe from its equities and liquid products sales desks. Bill Hillergass, a Chicago-based MD in single stock equity derivatives trading is also understood to have resigned on Friday afternoon. Siffringer, Bossolina and Hillergass all came from Lehman. Hillergass is off to BAML and Giobbe is off to Citi. The destinations of the others are unclear. They follow the departure of Pascal Bandelier, another ex-Lehman banker who came to Barclays via Morgan Stanley and went to Cantor in April.
2017's exits are just tip of the iceberg at Barclays, however. The British investment bank also lost swathes of the senior equities staff it acquired from Lehman during Jenkins' tenure. Barclays insiders say 30+ senior people escaped between 2013 and 2015. The list is huge and includes the likes of Matt Johnson, the former head of U.S. equities, Bill Bell, the former head of U.S. electronic distribution, Stu Linde, the former global head of research, along with Jimmy Gallagher, David Matlow and John Bove, all former senior salespeople. Gallagher, Matlow and others have gone to BMO Capital Markets. Bove and others have gone to Jefferies or Guggenheim. Some are simply sitting out of the market.
What made Jenkins so distasteful? It might've been something to do with his retail banking background and overbearing moralizing. It might also have been to do with his decision to focus on advisory and capital markets bankers ahead of salespeople and traders, or his capping of cash bonuses at £140k ($181k) in 2014. Or it might have had nothing to do with Jenkins personally and been related instead to the scandal involving Barclays' U.S. dark pool, which underpinned its U.S. equities business and was found in 2014 to contain undesirable high speed traders. Either way, Barclays' U.S. equities bankers weren't happy - and they voted with their feet. Those who remain blame St. Antony for the dissolution: "Jenkins effectively tried to shut the investment bank down for years," says one MD. "It's amazing it's still standing."
Barclays' didn't immediately respond to a request to comment for this article. The British bank's U.S. equities business isn't entirely devoid of Lehman's heavy hitters today though. LinkedIn suggests it still employs over 350 ex-Lehman staff in its equities division, including Eric Schlanger, the head of U.S. equities. Nor has Barclays' global equities business done badly since 2015 when compared to rivals: as the chart below shows, revenues in the business rose 9% between the first quarter of 2013 and the first quarter of 2017, compared to hefty declines at Deutsche and Citi. Only J.P. Morgan did better in this sample, and in Throsby, Barclays now has the architect of J.P.M's equities success on-board.
Even so, headhunters say the mass departures under Jenkins and ongoing departures this year leave Throsby with some big gaps to fill as he rebuilds the business. That fightback has already begun: Barclays recently hired Andrew Adams from Merrill Lynch for flow sales in its Boston office and additional strategic hires are expected soon. Barclays is also increasing cash bonuses and has done away with cash bonus caps for its managing directors. The rebuild is on. Maybe some of those ex-Lehman bankers might want to reconsider?