Barclays sees generational shift, rivals smell blood

Fri May 9, 2014 12:16pm EDT
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By Steve Slater

LONDON (Reuters) - Where Barclays (BARC.L: Quote) sees a "generational shift", its investment bank rivals are smelling blood.

The British bank, which under former chief Bob Diamond poached top staff and customers from competitors in trouble after the financial crisis, now risks suffering the same fate as it radically shrinks its investment banking business.

Diamond's successor as Chief Executive, Antony Jenkins, says he does not expect a further exodus of top talent after departures from Barclays' U.S. operation, but some trading staff at least are preparing for the exit as the bank pares back its ambitions to be a Wall Street powerhouse.

Barclays announced this week plans to shrink its debt trading business and axe a quarter of staff, focusing instead on U.S. and British clients and products where it ranks in the top five in business such as selling government bonds, stocks and currencies and advising on deals.

Tom King, who made his career advising telecoms firms on takeover battles, is tasked with making the strategy work and hailed it as a "step change" that was needed in a new era of tougher regulations that have made some trades too expensive.

"We're really shifting the investment bank from one that was a business run for revenue to one that is being run for return," King said on Thursday.

The worry for Jenkins and King is that top staff and clients leave and the business slowly dies, echoing the problems of Credit Suisse First Boston when it bought Donaldson, Lufkin and Jenrette for $11 billion in 2000, only for many senior bankers there to depart.

Jenkins, who previously ran Barclays' retail business and has no background in investment banking, admitted he feared a "death spiral" after an exodus of staff from its U.S. business last year. This prompted him controversially to raise bonuses for 2013 despite a fall in profits.   Continued...

A logo hangs outside a branch of Barclays bank in London July 30, 2013. REUTERS/Toby Melville