Foreign exchange (FX) trading is a big business for Barclays' investment bank. Barclays' mostly London-based front office FX sales and trading professionals number well in excess of 100 according to headhunters. Euromoney says Barclays' FX business ranks third globally, with a 10.24% of all global FX trading last year.
Nonetheless, Barclays' FX traders have been having a tempestuous time in 2014. Worse, they have seemingly been trounced by the notoriously poor-paying HSBC and the poor-paying and poor-performing RBS.
HSBC released its first quarter 2014 results today. As per the chart below (taken from a note on the bank by Bernstein Research banking analyst Chirantan Barua), they show a mere 7.8% reduction in year-on-year FX revenues in the first quarter. RBS's first quarter results, released last week, showed an even more modest reduction in FX revenues of just 4.5% over the same period.
Barclays' FX business, by comparison, seems to have done terribly. Barclays doesn't break out FX revenues alone, but its combined 'macro products' (rates and FX) revenues fell a massive 48% year-on-year in the first quarter. Much of that reduction was likely due to weakness in FX sales and trading.
Barclays' FX salespeople and traders, already battered by the FX fixing scandal, have reason to fear the bank's strategic review, coming tomorrow morning. That Barclays isolated results to its macro products business for the first time yesterday, thereby underscoring its bad performance, is cause for concern. Ominously, Barclays' finance director Tushar Morzaria said the bank has an inappropriate business mix and is over-reliant on its macro business for revenues.
FX headhunters say Barclays' FX professionals are nervous. However, there is nowhere for them to go. Citigroup has been climbing the FX sales and trading rankings in the past two years, but headhunters say it's not hiring. "FX recruitment is going to be sporadic at best this year," said one.
Another senior FX search consultant, speaking on condition of anonymity, said Barclays' senior FX salespeople look most at risk of redundancy. Yesterday the bank reiterated its intention of dumping directors and managing directors in the second quarter. As FX businesses everywhere move to an agency trading as opposed to risk-taking model, the headhunter said Barclays will have less need of its experienced FX salespeople in future. Andrea Anselmetti, head of European FX sales at Barclays already left the bank just prior to bonuses in February.
Barclays' FX professionals are unlikely to emigrate to the 'superior businesses' over at HSBC and RBS, however. Banking analysts say the good FX results at these other two British banks are not necessarily indicative either of interesting jobs or a wonderful quarter.
HSBC's solid FX revenues are due to flow generated by its trade finance and commercial banking businesses, points out Barua at Bernstein Research. "HSBC is not the place to work in FX if you're in the business if taking risk," he points out.
Similarly, Barua says RBS's exemplary FX results are mostly due to its poor performance and write downs in the first quarter of 2013. This year's results are flattered by the poor comparator.
On this basis, Barclays' FX business doesn't look quite so bad. But it doesn't exactly look great either. Barclays seems likely to employ far fewer FX professionals in future.