Barclays Expands Prime Broking as Rivals Pull Back after Archegos -- Financial News (2024)

By Paul Clarke

Of Financial News

Barclays PLC is making a fresh push into prime broking after rivals retreated in the wake of steep losses from the collapse of family office Archegos Capital.

The U.K. lender is hiring staff and aiming to grab market share in prime services as part of a broader expansion of its stock trading business, according to co-head of equities at Barclays, Paul Leech.

"We view prime services as a big opportunity and are investing heavily in the business," he said. "We're expecting to grow market share, and in order to provide the same level of client support, we need to continue to expand our resources to support that growth."

Banks' prime broking units, which provide services to hedge funds and family offices, were shaken by the collapse of Archegos, which was run by hedge fund Tiger Global alumni Bill Hwang. Its demise has cost banks hit by the crisis a total of $10 billion since March.

Credit Suisse Group AG was hit hardest by the blow up, losing $5.5 billion on the back of what an independent report into the incident described as a "lackadaisical" attitude to risk. On Nov. 4, the Swiss bank unveiled plans to largely close the unit, which executives said relied too heavily on leveraged bets that yielded little profit. The closure will cost Credit Suisse another $500 million in revenues next year, its chief financial officer, David Mathers, said during its investor day.

Nomura Co., which was the second-hardest hit from Archegos' demise with a $2.9 billion loss, is also pulling back from prime broking. The three biggest prime brokers--Morgan Stanley, Goldman Sachs Group Inc. and JPMorgan Chase & Co.--have all indicated their intention to maintain or grow the units.

"Clients tell us they don't want to be too concentrated with any one bank, and they also see the benefit of diversifying with a European bank," said Mr. Leech.

In Europe, Barclays is the fifth largest prime broker, with 15% of the market, according to data from Preqin, behind Morgan Stanley, Goldman Sachs, JPMorgan and UBS Group AG.

"The impact of Archegos has been a concentration of the prime broking business in the top three banks, which have balance sheet and risk appetite," said Youssef Intabli, head of equities at data provider Coalition Greenwich. "But I think there will be a redistribution of those balances over the next six to 12 months to avoid too much exposure to the major banks and this is an opportunity for European banks and smaller U.S. players."

BNP Paribas S.A. is also expanding its prime services unit. It has already taken on Deutsche Bank AG's shuttered prime services division, and has now struck an agreement with Credit Suisse to funnel its clients across to the French bank.

Barclays' push into prime broking is part of a broader expansion of its equities business, said Mr. Leech, who was promoted to co-head of global equities at the U.K. lender in May alongside U.S.-based Todd Sandoz after Fater Belbachir left to join Citigroup.

Employee numbers at the unit have increased by around 10% this year, and it has made key hires including Christian Treuer as co-head of equity derivatives distribution in Europe, the Middle East and Africa, Spyros Varoutsis, who joined from JPMorgan as head of flow derivatives and delta one, and Peter Ward, who leads electronic trading. In New York, Bill Bors and Scott Rice joined in senior roles over the summer.

Barclays had a 5.5% share of the global equities market in 2020, according to figures from Coalition Greenwich, up from 3.8% five years ago. After a record first half of 2021, revenues within its equities unit have increased by 28% to 2.5 billion pound ($3.33 billion) so far this year.

Earlier in November, Barclays revealed that Jes Staley, its chief executive who had spearheaded an expansion of its investment bank in the face of activist pressure, was stepping down after six years at the helm over an investigation into his ties with convicted sex offender, Jeffrey Epstein.

His replacement, C.S. Venkatakrishnan--known as Venkat--has already signaled a continued focus on Barclays' investment bank. Leech said that its equities unit was set for continued expansion in 2022.

"After substantial growth in 2021, we've identified areas for expansion next year," he said. Mr. Leech added that hiring is becoming more challenging amid a boom time for investment banks.

"The competition for talent is as intense as I've ever seen it," Mr. Leech said. "We want to stay ahead of that as much as possible--defend against attrition and adding key people in the right areas. We're on a growth trajectory, and are aiming to increase market share, which is attractive to a lot of people."

Website: www.fnlondon.com

(END) Dow Jones Newswires

11-25-21 0859ET

Barclays Expands Prime Broking as Rivals Pull Back after Archegos -- Financial News (2024)

FAQs

Is Barclays a prime broker? ›

Barclays' global prime brokerage services include financing for equities, fixed-income, OTC clearing, futures and foreign exchange, as well as providing clients with strategic consulting insights and capital introductions.

Who is the head of Barclays Prime Brokerage? ›

Barclays' prime finance platform

Global Head of Prime Brokerage, David Lohuis, has overarching oversight across equity financing, fixed income financing and prime derivatives services.

What is the market share of prime brokerage? ›

Goldman Sachs, JP Morgan and Morgan Stanley hold a market share of nearly 60% in prime, according to Amrit Shahani, partner at research firm BCG Expand, and are each closing in on US$1trn in client balances.

What is the difference between a broker and a prime broker? ›

A broker facilitates the trading of securities, such as the buying or selling of stocks for an investment account. A prime broker, instead, is a large institution that provides a multitude of services, from cash management to securities lending to risk management for other large institutions.

Who is the biggest prime broker? ›

  • Goldman Sachs, JPMorgan and Morgan Stanley continue to dominate the prime broking market, each holding $1tn in client balances and generating billions in fees. ...
  • According to Hedge Fund Research, of the 8,200 funds active in 2024, about 80% manage less than $1bn, and 40% have less than $100m in AUM.
Jun 24, 2024

Who is the major shareholder of Barclays? ›

Shareholders: Barclays PLC
NameEquities%
The Vanguard Group, Inc. 3.639 %533,571,8953.639 %
Credit Suisse Asset Management (Schweiz) AG 3.197 %468,769,5313.197 %
Solium Capital UK Ltd. 3.028 %443,930,0003.028 %
Dodge & Cox 3.027 %443,813,5413.027 %
1 more row

Is Morgan Stanley a prime brokerage? ›

Morgan Stanley Prime Brokerage's pioneering Capital Introductions platform provides the alternative investments community with hedge fund industry intelligence, market leading conferences, and hedge fund specific content.

Is Ibkr a prime broker? ›

An online version of a traditional Capital Introduction program designed to allow hedge funds which use IBKR as their principal prime broker to market their funds to IBKR clients who are Accredited Investors and Qualified Purchasers.

What are the risks of prime brokerage? ›

Prime brokerage is designed to be a low-risk activity, but wrong-way risk (WWR), the opaqueness of funds' positions and poor risk management can create vulnerabilities for PBs.

Is Goldman Sachs a prime broker? ›

Some of the largest prime brokers in the U.S. are investment banks, including Bank of America, J.P. Morgan, Goldman Sachs, and Citigroup.

How does prime brokerage make money? ›

Keep in mind that a prime brokerage makes its money from fees, interest on loans (cash, margin, and securities), and commissions. Based on this, the larger your assets under management (AUM), transactions, and compelling your strategies are the more attractive you are as a client.

What is Prime Services Barclays? ›

Prime is a comprehensive global financing platform integrated across asset classes and products, offering innovative solutions. Fulfill your financing needs across cash, utilising traditional margin lending and stock borrow/loan, and synthetics.

Is Barclays a broker dealer? ›

Barclays Capital Inc. is a registered broker dealer and investment adviser, regulated by the U.S. Securities and Exchange Commission. Member FINRA/SIPC.

What agency does Barclays use? ›

The credit-reference agencies we use are Experian, Equifax and TransUnion. If you're an existing customer, we may also look at the way you've managed your account or previous borrowing with us. If the overall credit score is high enough, we could give you the credit you've asked for.

What is agency prime brokerage? ›

A financial institution that acts on behalf of the client to complete the latter's investment transactions. Over 2 million + professionals use CFI to learn accounting, financial analysis, modeling and more.

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