Barclays details plans to revamp investment banking returns

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Barclays has set out a plan to improve returns within its investment bank by focusing on advisory and equity capital markets work while becoming less reliant on debt underwriting.

Taylor Wright and Cathal Deasy, who together lead Barclays’ investment bank, delivered a presentation to analysts on Tuesday where they explained how they aimed to add £700mn of income by 2026.

“Our investment banking fees are too skewed towards balance sheet driven products,” Wright said.

Although Barclays earned its revenues in the same markets as its top five US peers, the UK-based bank generates a greater proportion of those revenues from the more capital-intensive business of debt capital markets, he said.

“Our 54 per cent share of revenues from [debt capital markets] versus their 38 per cent means that we’re earning those revenues in a less capital efficient way,” Wright said.

Wright and Deasy have been tasked with improving the profitability of the investment bank even as Barclays chief executive CS Venkatakrishnan presses the division to reduce its share of the group’s risk-weighted assets from 58 per cent last year to 50 per cent by 2026.

Barclays’ share of global fees fell by more than 1 per cent in the four years between 2019 and 2023. The debt capital markets division contributed to the loss in fee income last year, highlighting the bank’s vulnerability to the business.

Wright and Deasy’s plan for the business follows the broader strategy mapped out by Venkatakrishnan earlier this year, in which he said the investment bank would shift resources to more profitable business lines and gain more market share from rivals in the advisory business.

The division also plans to focus on boosting its corporate lending and transaction banking services in the US, where its international corporate bank currently generates less than 10 per cent of its income despite 40 per cent of so-called priority clients being based there.

Barclays’ investment bank has undergone a series of changes since Wright, who previously worked at Morgan Stanley, and ex-Credit Suisse banker Deasy were installed as co-heads in 2023.

Those changes have included bringing some business lines into the investment bank, and hiring new leaders for some of its key industry groups, including ex-Bank of America technology banker David King and the financial sponsors dealmaker Martin Douglass from Morgan Stanley.

The bank is particularly keen to improve the volume of business done by investment banking clients who currently borrow from Barclays but do not use any other services, meaning they disproportionately contribute to risk-weighted assets.

“About one-quarter of investment banking lending RWAs are currently allocated to clients who use one or no additional products beyond the loan itself, and this typically yields an insufficient return,” said Wright. “Our North Star is delivering higher returns on a sustainable basis.”

This article has been updated to clarify that Barclays’ international corporate bank derives less than 10 per cent of its income from the US, not its wider investment bank