Barclays' investment bankers now have a new boss. Having been named as Barclays' new corporate and investment bank CEO in September, J.P. Morgan's former global head of equities Tim Throsby has now officially started as of today.
Throsby is another former J.P. Morgan executive to move across to Barclays after Jes Staley's appointment as CEO. He joins Barclays’ chief risk officer, C.S. “Venkat” Venkatakrishnan, its chief operating officer, Paul Crompton, and new investment banking CIO, Mark Ashton-Rigby who all came from J.P. Morgan.
But Throsby arguably has the biggest job on his hands to turn around Barclays' ailing investment bank. Here's what you need to know about the man and the challenges he's facing.
Throsby has worked at Macquarie, Lehman Brothers, Goldman Sachs, Citadel and J.P. Morgan. Aside from a brief period in fixed income at Credit Suisse early in his career, he's always been focused on equities. The story goes that Throsby was handpicked by Jamie Dimon to head up J.P. Morgan's EMEA equities division in 2010 from Citadel, having previously been president of its Asian and Japan business. This isn't strictly true. He left Citadel in 2008, and by 2009 was studying Law at Oxford University, presumably with an eye to switching out of banking. But J.P. Morgan came knocking in 2010 and the degree was never completed.
According to the FT's Lex column, Throsby is described as a "posh Australian", but the “the bar isn’t set very high”.
Some senior bankers believe the key to a successful finance career is to remain in the same place and seize opportunities as they arise. But Throsby has moved about a fair bit. We mentioned his employers above, but Throsby has worked across the Asia-Pacific and London, and never stayed with one employer for much more than seven years. His longest tenure was at Goldman Sachs, where he stayed for seven years and five months.
During his time at J.P. Morgan, Throsby increased revenues in its equities division from $4.5bn in 2012 to $5.7bn last year, and catapulted it up the league tables. There's a bigger challenge at Barclays. In the nine months to September 2016, Barclays was the worst of a bad bunch in equities - with revenues down 41% year on year. Deutsche was closest with a 25% decline. Barclays has already pulled out of cash equities trading in Asia, and is largely focused on the U.S. and UK across the investment bank now. Maybe some tough decisions need to be taken.
Barclays has already said that it's focusing more on the U.S. and UK, that it won't upsticks from London after Brexit and that it's aiming to pick up more British advisory business. Maybe this will mean more hiring in London, but Barclays is among the larger investment banks in the UK anyway. Analysts at J.P. Morgan estimate that 10,000 investment banking employees - or 51% of the total - are based in the UK. The Credit Suisse numbers below are dated - it has moved 4,300 employees out of the UK already - so Barclays may be the biggest investment bank in London. In theory, this isn't a problem - the latest round of 1,200 job cuts and a global hiring freeze is likely to have reduced this figure significantly. But it's also a potential target for any necessary cuts.
However, Sir Gerry Grimstone, who took over as deputy chairman at Barclays after Staley took over, told the FT that: "We are moving into a position where we are the only significant investment bank left in Europe.”
Barclays is aiming to build in the U.S. be a 'tier one' investment bank, and Donald Trump's election as President will benefit its focus on fixed income. But despite this, there are some looming clouds for Barclays' investment bank in the U.S, which Throsby will have to deal with this year. Firstly, while Deutsche Bank has now settled with the Department of Justice over its part in mis-selling mortgage-backed securities, Barclays is still fighting its corner. Barclays is reported to have been willing to pay $2bn to settle the case, but the DoJ wanted double that. Whether this gamble pays off remains to be seen.
Then there's the capital requirements around its U.S. IHC (international holding company). European banks are required to set up these bodies to abide by the same capital and liquidity requirements as their domestic competitors, even if their HQ is based elsewhere. It's cost them billions already, but Barclays is among a handful of European banks that look under-capitalised compared to their U.S. peers. This is likely to be a headache this year.
Barclays' hiring freeze has been very effective. It lost 8,000 employees in just four months simply by not hiring anyone and - despite the occasional recruit last year - very few people have made it through the door. That's all very well when banks across the street are firing people, but what if you need to retain staff? Barclays' fixed income trading division has been outperforming could be much better positioned this year, and its advisory business has also been doing well. New figures from Dealogic suggest that Barclays rose from 8th to 6th in the overall investment banking revenue league tables. In the U.S, revenues were relatively static, but it gained market share, as did its EMEA team.
Jes Staley made it clear in the bank's Q3 results that the screws are still on compensation that the people remain one of the "three big levers" to tackle costs. Morale is likely to be low in the investment bank, and a big challenge for Throsby will be keeping the team motivated.
Photo: Getty Images