Barclays Capital, which brought in just over a third of the £2.9 billion its parent earned in the first six months of the year, has big hiring plans this year, mostly in Europe and Asia, its president told IDD on Monday.
“We hired 600 people year-to-date and we expect that to be more than 1,000 people this year and into next year,” says Jerry del Missier, president of Barclays Capital.
Income at Barclays, the parent company, grew 37% to a record £16 billion. Profit at Barclays Capital doubled to £1.047 billion.
The British banking giant said the gain in Barclays Capital was tied to the integration of Lehman Brothers, which it purchased out of bankruptcy court last September, and improved credit markets.
That said, Barclays Capital did see losses of £3.5 billion related to credit market exposure in its trading books, with a deterioration in valuations in monolines and commercial real estate in the U.S. and Europe had a “notable impact.”
Del Missier said the build up in staff this year has been in European and Asian advisory teams – that is, M&A bankers – as well as professionals involved with equities sales, trading and research.
When it comes to hiring, del Missier says the job market for investment banking professionals has “normalized.” Earlier this year, fewer firms were readily hiring, there were more professionals out of work and new hires were inexpensive salary- and bonus-wise. “We have seen a more normalized hiring environment. The hiring market earlier this year was very favorable. It was easier to focus on areas where we needed to hire,” according to del Missier.
At Barclays Capital, those hired year-to-date include advisory bankers, equity sales and trading as well as research professionals. A bulk have been for jobs in Asia and Europe.
Asked if Barclays should not have considered buying Lehman’s businesses overseas even as it swallowed up Lehman's investment bank in the U.S., del Missier says such a purchase “would have been complicated. There would have been a lot of overlap with our European presence.”
Total income at Barclays Capital – excluding credit market losses – more than doubled to over £10 billion, reflecting gains in fixed income, currencies and commodities.
Other Wall Street banking giants such as Goldman Sachs and JPMorgan reported gains from fixed income, currencies and commodities business lines during the first two quarters of the year.
Asked if he could define just how much of the profit at Barclays Capital in the first six months of the year is tied to bringing on Lehman, del Missier said “it is difficult to say,” but he estimated that “30%, or a third, is attributable to the acquisition.”
Del Missier says the second half of the year likely won’t see a marked improvement in securitization despite the improved equity and corporate debt market conditions. “For securitization to come back, you need a broad consensus that underlying prices of assets have stabilized and start improving,” says del Missier. “You need a broad consensus that [commercial and residential] property prices have bottomed. Commercial property is still under stress.”
In the second half of 2009, del Missier says that M&A advisory activity will be an important source of fee income for Barclays Capital. “You will see growth in advisory business as companies look to take advantage of the improved sentiment. Companies are still cheap,” he said, adding that “what happens in this kind of market environment in virtually every industry, historically, is that when you are coming out of a recession you see an increase in advisory activity.”
By this he means, that firms on sounder financial footing take advantage of the relatively lower cost of competitors and buy them. Then there are firms that need to divest of assets to shore up their balance sheets, he says.
When it comes to the debt underwriting side of the business, del Missier says his firm will be active in helping states and corporations refinance their debt. Also, he said more companies likely will come to public markets via initial public offerings and some of these IPOs likely will be businesses that are within private equity and LBO fund portfolios.
Referring to KKR's recent decision to sell its Dollar General store via an IPO, del Missier said the sale of companies by sponsors “it is driven by the opportunity to cash out and it is driven by the desire to create liquidity to put money to work.”