Barclays cuts back in Asia, Americas & EMEA; dealmaker advisory spared
January 26, 2016
Barclays is the latest bulge bracket bank to cut staff amid volatility in emerging markets, commodities and high-yield credit. The investment bank plans to eliminate up to 1,200 jobs in order to scale back operations in Asia, Russia and Brazil. Local currencies in the latter two commodity economies have fallen 58% and 45%, respectively, against the U.S. dollar in the last 18 months. The Barclays cuts will exclusively target the public markets including all Asian cash equity research, sales and trading, convertible bond trading and all precious metals trading; coverage of Brazil and Eastern and Central Europe will shift to New York and London.
Dealmakers were spared from this round of cuts, yet bankers will have their work cut out for them in 2016. As noted in our 2015 Annual U.S. PE Breakdown, median debt percentage used for PE-backed deals has moved consistently lower over the past few years, due in part to big banks having difficulties syndicating debt packages. In addition, we’ve also seen hints of larger, traditional M&A transactions begin to face issues. According to our recently released M&A Report, 1Q 2015 saw 50% of all deal value come from deals worth $5 billion or more. By 4Q, however, that number shrunk to under 42%, again attributed to some of the difficulties in the debt markets. That said, Barclays will maintain a full Asian offering in debt finance, risk management, infrastructure finance and cross-border M&A advisory as it looks to continue helping clients navigate through transitional paradigms similar to what we are seeing today.
Barclays’ retrenchment into core markets of the U.K. and U.S. mirrors the divergent monetary policy between Anglo-American central banks and the rest of the world. The firm is not alone in scaling back global ambitions. Last year Deutsche Bank scaled back scandal-plagued trading operations in Russia, while HSBC sold off its Brazilian business to Banco Bradesco for $5.2 billion. U.S. interest rates are rising, which in theory should help mitigate the depressed net interest margins banks have experienced with seven years of near-zero interest rates, yet many of the aforementioned issues are offsetting that positive outcome. Moving forward, the extent to which the core banking advisory operations of these larger financial institutions will play will be pivotal to maintaining strength not only for the banks themselves, but to continue servicing heightened demand for M&A clients at a high level.