The pressure is on at Barclays after crazy MD hiring in 2017
Tomorrow morning, Barclays reports its results for 2017. It will be an important moment for the British bank, which insiders say hired no fewer than 40 managing directors (MDs) to its banking and markets business in 2017.
With half last year's new MDs hired in the second half of 2017, the fourth quarter will be too soon for dramatic improvements, but investors could be forgiven for expecting things to at least be moving in the right direction. 40 MDs is a big investment for a business that generated a return on equity of only 5.9% in the third quarter of last year. In equities sales, trading and research as a whole, the bank says it hired 50 people last year.
Barclay's decision to hire in a new strata MDs as investment bank CEO Tim Throsby seeks to reinvigorate the markets business could be read as a rejection of the juniorization process in evidence elsewhere. It certainly seems at odds, for example, with Deutsche Bank, where new head of equities Peter Selman has vowed to hire and train-up graduates as he seeks to reinvigorate the equities business.
Barclays' influx of new MDs has, however, been accompanied by an outflow of existing staff. Over 100 MDs and directors were let go last month, many from teams which benefited from the injection of new senior talent in 2017. Rather than a refutation of juniorization, Barclays has therefore been engaged in some straightforward upgrading.
Insiders say it's already having the desired results. Barclays aspires to be, "the leading full-service equities franchise in the UK." Last year, it ranked second for market share on the London Stock Exchange, the highest its been since 2017. Things aren't looking bad in fixed income either: Barclays ranked second for overall fixed income market share in Europe according to a Greenwich Associates survey of November 2017. In the same survey, it ranked first for rates and third for credit.
2018 will, however, be the crunch year for Barclays' investment bank. After last year's influx of senior talent, very tangible results ought to be visible by the second or third quarters. If not, other banks can be forgiven for questioning the value of hiring in expensive outsiders. Why not invest in developing technology systems and training up graduates instead?
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