Closing out what has been a successful second half of the year, Barclays Capital plans to carry its momentum into 2003, including programmatic issuance of its own credit card receivables and a move into underwriting new asset classes - notably home equity.
Contrary to many banks, which are cutting back ABS staffers, Barclays is expanding operations, with new hires expected in the near future.
"We will be maintaining our momentum in 2003, with our focus on expanding into home equity," said Michael Wade, head of the U.S. structured finance group. "We also plan on increasing our presence in other, less generic assets," he added, indicating leads in the aircraft and fleet-lease sectors before year-end or early 2003.
After leading four transactions in the first six months of the year, Barclays has brought 10 deals since July, including three global MBS and a Gracechurch Barclays credit card-backed deal. For 2002, the bank has seen first-time mandates in the auto and credit-card sectors and more are planned.
The mid-2001 hiring of three bankers from Salomon Smith Barney - Jay Kim, Mark Sun and Thomas Dang, and Joseph Astorina from Fitch Ratings - has paid dividends with third-party auto lenders (see ASR 2/18/02).
This year, Barclays has been lead (or joint lead) manager on new issues from American Honda Finance, AmeriCredit Corp., Ford Motor Credit, General Motors Acceptance Corp., Household Finance and Hyundai Motor Co.
In addition to third-party business, Barclays has the potential for substantial ABS volume with U.K.-based captive credit-card and mortgage lenders under the Barclays umbrella.
Gracechurch Card Funding priced its second second credit card ABS last month and is expected to become a more programmatic issuer in 2003. Both Gracechurch transactions to date have been completed in global, U.S. dollar-denominated form.
In mortgages, Barclays subsidiary Woolwich
plc, a mortgage lender on par with global ABS issuers Abbey National plc and HBOS plc in lending activity, may
follow the Gracechurch lead with global MBS transactions.
At a time when banks are making across-the-board staff reductions, even in the profitable structured finance groups, this is one of the lone expansion programs on the Street.
Despite booming new-issue supply, underwriting margins have been squeezed, forcing banks to cut back. "Some of the bulge brackets have felt impact of decreasing margins," Wade said. "But we will operate without some of the overhang of some banks," he added.
Barclays Capital's business model maintains a strict focus on debt financing and risk management. Similarly, according to Wade, "the ABS team wants to keep its focus; the group does not have to be involved in all asset classes."
The term ABS origination team is currently at 16. With the new hires in the coming year, however, the team is expected to grow. Barclays will be beefing up its sales, trading and syndicate groups marginally, as business increases.
One of its biggest strengths is its European presence, giving it a wealth of demand that has yet to reach the limits for U.S. asset-backed paper.
While European investors typically shy away from lower-yielding short-dated auto-loan and credit-card paper, Barclays is working with European investors on structural changes that could be implemented to make U.S. ABS more attractive overseas, such as offering more bullet tranches of auto ABS, for example.
Also, after leading a pair of Asian-captive auto deals, Barclays has penetrated Asian investors, with which Barclays is also probing for potential investor bases and distribution channels.