Morning Coffee: Barclays is depending upon two men in New York to prevent £1.7bn of cost cuts. Evercore, like Goldman Sachs but better
Cathal Deasy, who's Irish by birth, may have an accent thatcan be a bit difficult to understand for Barclays bankers in New York, but they'll need to get used to lip-reading. The words of Deasy, and of Taylor Wright, his fellow co-head of investment banking at Barclays, are critical to Barclays' immediate future.
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The two co-heads have run investment banking at Barclays since January 2023. Under their leadership, Barclays lost around 40 US managing directors to competitors last year, while the fees it generated from investment banking declined 12%. Barclays' CEO, C.S. Venkatakrishnan, is suggesting that things need to change.
Speaking to Bloomberg, Venkat said Barclays' investment banking business is behind its sales and trading business when it comes to «ROE efficiency», or the ratio of income to risk weighted assets. The investment banking business, run by Deasy and Wright, needs to improve its ROE efficiency and to generate higher revenues, said Venkat. If it doesn't, he added that Barclays will need to cut up to £1.7bn more from costs. “We’ve also got cost projections which are based on that [higher] revenue,” Venkat observed.
Deasy and Wright are therefore under a bit of pressure. All the more so, because Venkat doesn't want just any kind of investment banking revenues. Barclays has historically been strongest at generatingdebt capital markets (DCM) revenues, but these are not the ROE efficient reveues Venkat wants. The future must be all about advisory (M&A) and equity capital markets revenues instead.
This is where Deasy (a natural resources M&A banker from Credit Suisse and Deutsche Bank) and Wright (an ex-Morgan Stanley ECM banker) come in. Unfortunately,
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