Throsby out to conjure up the spirit of Barcap
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Throsby out to conjure up the spirit of Barcap

Tim Throsby Barclays 230x150 source Barclays

Tim Throsby’s revamp is designed to switch Barclays back to a risk-on mindset and reignite growth in its European corporate finance business, writes David Rothnie

When Barclays’ global banking executive committee presented to the group board earlier this year, the bank’s European corporate finance business was the centre of the debate. Those present agreed that the US business, its most mature, was performing well, while its Asia Pacific business had strategic clarity.

But there were concerns that while the bank is well positioned in its core UK market, it was not firing on all cylinders in Europe and delivering a seamless service to clients irrespective of their location.

Sam Dean, then head of European corporate finance, argued internally that his business had just delivered its record revenues but in order to maintain the momentum, the European business would need support and investment.

He got his wish and the group executive committee signed off on an investment programme that enable it to hire fresh talent and complete the build-out that it started eight years ago, but which has flat-lined in the wake of the bank’s restructuring.

Senior management agreed to call the strategy one of ‘targeted growth’, so don’t expect a hiring spree. But while the language is nuanced, the mood music at Barclays has shifted up-tempo and that is down to the man conducting it, Tim Throsby.

Previous banking heads had pressed the case for investment in Europe before with little success, and after the initial build-out under Bob Diamond in 2012, investment in the region had stalled.

Diamond’s successor Antony Jenkins oversaw a painful restructuring of the investment bank that saw it retreat into its shell, and since Tom King retired in May 2015, the investment bank has suffered from a leadership vacuum. Group chief executive Jes Staley, who joined in December 2015, has since firmly recommitted to investment banking, but he also instigated a hiring freeze.

A new hope

With the arrival of Throsby as president of Barclays International as well as CEO of the corporate and investment bank in January the vacuum has been filled and the hiring freeze lifted. 

Of the string of former JP Morgan senior executives to have followed Staley across to Barclays, Throsby’s arrival was perhaps the most keenly anticipated.

Throsby, an Australian who had just acquired British citizenship, arrived in January on a mission to reinvigorate Barclays. He initially set off some water-cooler gossip by knocking through King’s old office to take double the space . But once he began meeting senior colleagues for one-on-ones, they were immediately impressed with his energy, knowledge and saw that he was not simply looking to make cosmetic changes.

His remit covers international cards, private banking and overseas services and the corporate and investment bank, and he arrived with a clear mandate and vision. 

Throsby wants to make the corporate bank more efficient by reviewing some relationships with its long tail of clients that may be unprofitable, in line with its investment banking client relationships, to ensure they are providing sufficient returns. 

Recapturing BarCap?

Throsby ran global equities and prime services at JP Morgan and his trading background, both at JP Morgan, but also Goldman Sachs and Citadel Securities, has already endeared him to the markets team. Throsby’s message to them is to take more risk and shed an insular mind-set that is a hangover of its restructuring and which he believes has constrained the business. He reckons his markets team can boost risk by 20%-30% and still be within the existing trading limits.

Beneath the talk of ‘targeted’ or ‘gentle’ growth lurks a determination on the part of Throsby to enforce a cultural shift more in keeping with the bank’s pre-crisis incarnation. He has told his bankers that he wants to recapture the old BarCap culture, and fears that the focus on compliance and control has led to the firm losing some of its commercial edge .

He refers to himself as talent-led, which means he’s prepared to tinker with organisational structures in order to make room for the right people, and to find the brightest and best.

But with US rivals enjoying stability and a growing market share, while a breed of independent firms are also scaling up, acquiring top talent is not as straightforward as it looks. 

For example, last month Barclays was thwarted in its attempt to hire Laurent Marquis, the former head of equities trading at JP Morgan, who opted instead to join Citadel Securities. Marquis, who quit JP Morgan earlier this year, would have been a perfect fit as Throsby looks to boost Barclays’ derivatives business, which he feels has gone too far in cutting costs. He’s also looking recruiting people in European rates, a historical strength of the old BarCap platform.

The bank’s corporate finance business has also been challenged to deliver some of the old commercial, free-wheeling spirit of Barclays Capital.

Dropping Newton

The raft of management changes he instigated this month marked a resetting of the so-called Newton management structure that was put in place last year. The Newton structure organised management of the bank along regional lines to reflect the new regulatory era which demands regional subsidiaries, whether an international holding company in the US, or the UK ring-fenced bank. The drawback of Newton is that it weakened the connectivity of Barclays' corporate finance model, and some felt it weakened the bank in Europe. Throsby has addressed this by appointing New York-based Joe McGrath as sole head of global banking, with oversight for the entire business.  

In addition, Barclays has handed John Miller, who is head of banking for the Americas, additional responsibility for global industry coverage banking and the bank will place a greater emphasis on the global heads of industry groups to drive greater connectivity.

“Just the sheer size of the US market means Barclays derives over half of its IB revenues from there and the bonus pool reflects that. Europe’s been a tough sell to get the bank to invest in, so this is a positive development,” said a senior Barclays source.

It’s also a crucial one. The acquisition of Lehman’s North American business in 2008 put Barclays corporate finance business on the map and was a determining factor in the bank serving as a counterparty to top European corporates.

But the reverse is also true — Barclays needs a strong European business so it can complete its offering for the clients it serves.

“You can look at this structure or that structure and there is no such thing as an ideal one for banks,” said one senior Barclays source. “But whatever it is, it has to be global and there needs to be accountability on that level.”

Who to hire?

One of McGrath’s top priorities is to hire a dedicated head of investment banking for Europe and the Middle East (Barclays is exiting from Africa) to replace Dean, who announced his retirement among the recent round of promotions. The decision did not come as a big surprise to those who know him.

Dean has never seen himself as a career banker has talked about retirement before. This was after all the man who, when he banked his first bonus at Dresdner Kleinwort Benson, announced he was off backpacking. But he has left a strong legacy. While there has been churn at the top of Barclays, Dean’s European executive committee, which comprises Thierry Le Palud, Tom Johnson, Carlo Calabria, Pier Luigi Colizzi , Ken McGrath, Michael Moravec, Philip Lindop and Crispin Osborne, is solid.

There are some key people that McGrath needs to retain and Richard Taylor sits near the top of that list. Some say he was wavering over his future, but in the latest round of promotions he has committed to remaining chairman of global banking.

As well as Dean’s ExCo, there are other talented operators such as Matthew Smith and Alisdair Gayne that should form an essential part of the next phase of growth.

The arrival of a new head of corporate finance risks disrupting that, and it’s important for morale that anyone coming in to run the business should be comfortable with the existing team and plan.

Outside influence

It’s likely that Dean’s successor will come from outside the organisation, although the terms of Throsby’s gardening leave means he is prevented from hiring directly from his former employer until the autumn, so if he has a chosen candidate at JP Morgan an appointment may not be imminent. 

Barclays’ European business was built in a hurry as the bank looked to prove its global credentials, and mistakes were inevitably made. But the bank is clear about where its hiring priorities lie and it is looking to bolster its offering in FIG, and financial sponsors as well as the UK. Barclays is seven years into its European corporate finance expansion, which makes it, in relative terms, still a newcomer.

But a growth strategy cannot mean an abandonment of control. Barclays’ European business still does not cover its cost of capital.

“Barclays’ strategy successfully stemmed a decline of IB revenues during 2016, but must now deliver improvements in returns. To achieve this, management appears willing to allow costs to rise, partly to enable expansion into new businesses… we question the rationale for this investment,” said analysts at Berenberg in a note on May 24.

FiRMing up

Perhaps not, but one of Throsby’s first steps was to create a new unit called Financial Resource Management (FiRM), a 50-strong team led by Art Mbanefo that looks across the investment bank’s business and ensures efficient management of the bank’s capital and balance sheet.

The closure of Barclays non-core at the end of June is a symbolic moment because it calls time on the restructuring and Throsby wants the next era to start on the front foot. But that won’t be easy.

While Diamond, the bank’s last great risk-taker, was dumped by regulators, Staley faces a nervous few weeks as he awaits the outcome of the investigation by the Financial Conduct Authority (FCA) and the Prudential Conduct Authority ( PRA) into his breach of the bank’s whistle-blowing rules.

Invoking the spirit of BarCap might provide the necessary momentum, but only if it doesn’t attract any of the negative associations.

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