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Barclays limits potential Asia clients
From the Financial Times of Sun, 21 Dec 2014 08:07:57 GMT
The Barclays Bank PLC, Pakistan, logo is displayed outside a bank branch in Karachi, Pakistan on Thursday 15 Aug 2013©Bloomberg

Barclays’ investment bank in Asia has trimmed its list of potential clients by almost a third as part of a “merciless” root and branch review of its activities in the region.

The move is part of the UK-based bank’s sweeping efforts, begun in May, to drastically restructure its underperforming investment banking business, including cutting a quarter of its global workforce.

In Asia the upheaval has involved a change atop almost every business and cuts of 5 per cent of the workforce, although the bank is now hiring again.

Reid Marsh and Patrick Kwan, appointed co-heads of Barclays’ investment bank in Asia during the revamp, told the Financial Times in an interview that they have since undertaken “merciless client selection” and cut their coverage list by 30 per cent — although the slimming process did not involve jettisoning any clients with whom the bank already worked closely.

“What we mean is those we were covering but where we haven’t earned any fees or where the fees don’t fit in the strategy,“ said Mr Kwan. ”Looking back we were trying to respond to too many RFPs [requests for pitches]. By the time those go out, you should already know where you are on the deal.”

Initial public offerings in the region, notably Hong Kong, have become famous for employing ever-larger collections of junior bookrunners, collected through RFPs or a company’s own banking relationships, where bankers will admit privately the work is not profitable but is done simply to collect league table credit.

Earlier this year, WH Group used a record 29 banks including Barclays for a $6bn IPO that ultimately failed, partly because of its unwieldy collection of advisers.

Mr Marsh said they had filtered potential clients by their interest in the bank’s global reach, the likelihood they would use more than one product Barclays offered and their “attitude and propensity to pay fees” — which is not a given in a region where banks are sometimes less advisers than simple executors of deals pre-arranged between tycoons or state-owned enterprises.

Barclays’ Asian investment bank produces a fifth of the division’s global revenues, according to a presentation by Andrew Jones, co-chief executive for the region, in Singapore last month. That is ahead of the average of 12 per cent implied by Asia’s share of global investment banking fees.

Investment bank chiefs in Asia agree that roughly the top three banks, by wallet share, are profitable while the next three probably break even, leaving a long tail of banks in the region dependent on business in the US and Europe to cover their bonus pools.

Mr Marsh said, however, that Barclays’ operations were solidly profitable and had the potential to generate ”double-digit” return on equity — in line with the pledge by Barclays chief executive Antony Jenkins that the overall bank will reach 12 per cent by 2016.

“We are not running this as a subsidised business, it’s profitable in its own right,” said Mr Marsh.

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