Barclays Eyes Sovereign Wealth Funds in Investment Bank Push (2024)

Jenny Surane, Jonathan Ferro and Lisa Abramowicz

March 18, 2024 at 12:47 PM·3 min read

(Bloomberg) -- Barclays Plc is seeking to expand its relationships with sovereign wealth funds and private equity giants as part of its efforts to improve the profitability of its investment banking division by expanding in advisory and equity underwriting.

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Those firms — which are sitting on trillions of dollars of dry powder for deals — are the kind of key clients Barclays is hoping to secure as it looks to move beyond the debt underwriting for large, multinational corporations that it’s long been known for, Chief Executive Officer C.S. Venkatakrishnan said in an interview with Bloomberg Television. The bank already has the talent it needs to accomplish that shift, he said.

“We still work with corporations in a very big way, but, in addition to that, you’ve got the financial sponsors and the sovereign wealth funds,” Venkatakrishnan said. “The growth of concentrated pools of capital makes it important to have that full relationship with those players in the market.”

Barclays and its rivals are betting that sovereign wealth funds will continue to deploy billions of dollars to get private equity takeovers across the line amid a broader dearth in deals by corporations. Sovereign wealth funds spent a record $17.2 billion on such co-investments in the first half of last year, which was up 24% from the same period in 2022, Bloomberg has previously reported.

Read more: Private Equity Titans Tap Sovereign Wealth to Get Deals Done

Barclays shares have struggled in recent years and the bank has long faced questions about the viability of its investment bank because of the amount of capital it consumes relative to other, higher-returning parts of Barclays’s business.

But Venkatakrishnan has said that is because it has a larger footprint in debt capital markets relative to peers. That is why he’s now focused on expanding in merger advisory and stock underwriting.

“When you move into advisory fees you start getting a better return on your capital — I think it is an important part of the shift,” he said on Monday. “Our job is to, having created the plan, is to execute it and the share price hopefully will follow.”

Barclays last month announced it would go on a £2 billion ($2.55 billion) cost-cutting drive and reorganize its reporting structure in order to boost profits. The bank vowed to return at least £10 billion to shareholders in the coming years, while it boosts revenue to £30 billion.

Shares of Barclays have surged 9.3% since it unveiled those plans on Feb. 20, making it one of the best performers in the FTSE 100 Index.

As part of the changes, Venkatakrishnan also shuffled his top managers. Adeel Khan was appointed sole head of the global markets division, while his former co-head Stephen Dainton became president of Barclays Bank Plc and head of investment bank management. Cathal Deasy and Taylor Wright are continuing in their current roles as co-heads of banking.

Vim Maru is the new CEO of Barclays UK, while Matt Hammerstein, the previous holder of that role, is now leading the UK corporate bank. Sasha Wiggins is leading the private bank and wealth management division.

Loan Growth

The bank also said last month that it sees risk-weighted assets climbing by £50 billion in the coming years. The company is planning to allocate £30 billion of that to its UK-focused businesses, which include a consumer bank, a corporate bank and a private bank and wealth management division. The remaining £20 billion will be allocated to the US consumer bank.

Part of that is tied to the company’s confidence in the health of the UK and US economies even as the company has seen delinquencies among its consumer customers tick up slightly in recent months, Venkatakrishnan said on Monday.

“The economy is stabilizing, it looks like on both sides of the Atlantic you’re having a softish landing,” he said. “Generally, we are constructive towards lending.”

--With assistance from Jan-Henrik Förster.

(Updates with additional details from interview beginning in first paragraph.)