One thing to start: Singapore’s GIC has advised “doubling down” on Big Tech rather than overvalued start-ups in the booming generative artificial intelligence sector, the chief executive of the $700bn sovereign wealth fund told the FT in an interview.
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Will Barclays ever recover?
After decades of debate over Barclays’ investment banking strategy, shareholders are growing restless.
The UK lender’s corporate and investment banking unit generates a lower return on equity than its consumer bank — 11.5 per cent versus 21 per cent, to be precise.
That is despite dwarfing the consumer bank in financial resources. It accounts for £219bn in risk-weighted assets, up from £122bn at the end of 2014, and compared to £73bn at the UK retail bank and £40bn at the cards and payments unit.
It was this imbalance in returns that was at the crux of a three-year campaign by activist Edward Bramson to scale back the UK’s last remaining global investment bank.
Bramson’s crusade ended in 2021 in failure after Barclays’ then-CEO Jes Staley refused to retreat. But some shareholders have begun voicing similar frustrations, the FT’s Stephen Morris and Harriet Agnew report.
For Staley’s replacement CS Venkatakrishnan, restoring the equilibrium between Barclays’ investment bank and consumer division poses a challenge that will decide his fate.
Though the division may dwarf its other business lines, the investment bank still lacks the scale of its US rivals. With less resources to invest in top-tier talent and technology, Barclays is failing to deliver results.
The advisory and capital markets unit continues to put up poor numbers. The third quarter was especially disappointing. Revenue fell 30 per cent to £375mn, hitting the lowest level since at least 2015, including just £80mn from mergers and acquisitions advice. Worse, leadership changes and poor morale have prompted an exodus of employees to rival Wall Street firms.
UK regulators haven’t made Venkatakrishnan’s job easier, either. The so-called ringfencing law requires British lenders to split their consumer and investment banking operations into separate legal entities, a measure that’s meant to protect depositors from trading losses but racks up costs in the process.
A tax surcharge on bank profits and the Bank of England’s ban on dividends during the pandemic have also helped push investors to their limits. “We are trying to compete with the Americans with a 400-pound gorilla on our back,” says one senior figure at the bank. “Investors just don’t know what regulators are going to impose on us next, so they are putting their money elsewhere.”
To Venkatakrishnan, who has enlisted Boston Consulting Group to conduct a strategic review of the lender, wrestling with the aforementioned gorilla and Barclays’ falling share price requires a measured approach.
“There are valid indications of frustration and I sympathise with them, but we want to do this carefully, methodically and thoughtfully,” he said of dwindling shareholder returns.
But time may not be on Venkatakrishnan’s side.
One former investor who sold out of the stock describes Barclays as being stuck in a “killing ground” between the giants of JPMorgan Chase and Goldman Sachs, and the more targeted, lower-cost advisory boutiques such as Jefferies and Moelis that have begun to encroach on what’s left of Barclays’ territory.
Business is slow for the City’s dealmaking authority
The UK’s Takeover Panel is a secretive and powerful group.
The independent public body regulates dealmaking in the City of London, keeping bankers and lawyers in line with The City Code on Takeovers and Mergers — London’s holy book for dealmakers — with the threat alone of its dreaded “cold shoulder” for potential offenders.
But even the panel hasn’t been immune from the broad plunge in M&A this year. The Takeover Panel posted an annual deficit of £3.8mn after tax in the year to March.
That marked the first such loss since 2014, another sign of the global slowdown in M&A that has also hit the UK.
The group funds itself from fees charged on transactions and filings, and is staffed by a mix of employees and secondees from banks and law firms.
Its income fell 25 per cent in the year to March. That may not be a surprise, given the number of firm takeover offers during that period fell 20 per cent to 48. Just 12 of the deals had an offer value of greater than £1bn, down from 16 a year earlier.
Some respite has arrived though, in the form of UK regulatory changes on the horizon that could make it easier for dealmakers to get transactions over the line.
The government’s investment screening powers are to be pared back to make them “more business friendly”, deputy Prime Minister Oliver Dowden has told the FT.
Dowden is launching a review aimed at “narrowing and refining” the UK’s National Security and Investment Act, which allows the government to scrutinise and ultimately block takeovers.
While the changes may be welcome for dealmakers, however, they shouldn’t get too excited. It would “be foolish to imagine that nervous tinkering will have any impact on M&A”, our colleagues at Lex write.
The real estate tycoon facing a ‘death knell’
Last week, a year after its headquarters was raided by a squad of Austrian police, René Benko’s sprawling property empire announced it was urgently restructuring.
Despite owning assets from the luxury London department store Selfridges to the Chrysler Building in New York, the controversial real estate tycoon and his Signa Group haven’t always been household names.
That has all changed, the FT’s Sam Jones details, as the charismatic property developer’s penchant for complex financial engineering has become a thorn in its side.
The drama over Signa’s financial woes picked up earlier this month when the billionaire was forced out of the boardroom by his minority co-investors. It has placed an uncomfortable spotlight on the company’s leverage.
Signa’s borrowings run into the billions, according to two people familiar with the company’s balance sheet. Signa Holding — the central hub of the corporate network — was due to pay back €1.3bn in debt this year alone, according to a document seen by the FT.
Many loans, including hundreds of millions lent by European banks, are collateralised directly against individual properties, according to two Signa lenders. Others are not.
German restructuring expert Arndt Geiwitz has been brought in to sort through the mess, including resolving a €200mn private bond issued by Signa that matures at the end of the month.
In the meantime, Austrian media — including the tabloid Kronen Zeitung, of which Benko is a shareholder — are having a field day.
The Krone, as it is known, was the first to reveal Benko’s ouster. “This is the death knell,” it declared.
Job moves
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Mark Mobius, one of the founders of emerging markets investing, is to step down from his eponymous firm after a 40-year career in asset management.
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A group of private equity lawyers from Paul Weiss including Jeffrey Kochian, Gerald Brant and Brittany Harrison have joined Sidley Austin’s New York office as partners. The move means that Sidley has now hired 11 private equity lawyers from Paul Weiss in just several months.
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Oaktree Capital Management has hired Olivia Guthorn, previously a member of Apollo Global Management’s corporate credit team, as a managing director in New York.
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Kirkland & Ellis has poached Linklaters tax partner James Morgan in London.
Smart reads
How the FDIC failed its employees Sexual harassment, misogyny and other toxic behaviour has gone unchecked at the federal banking agency for years, according to a Wall Street Journal investigation.
Going solo Indian banker Uday Kotak struck out on his own by eschewing tradition in an economy dominated by family dynasties, the FT reports.
Crypto at a crossroads The trial of Sam Bankman-Fried has dealt the industry a tough reckoning, as explored in this FT Big Read. Will it rebuild or retreat?
News round-up
OpenAI chief seeks new Microsoft funds to build ‘superintelligence’ (FT)
Wendel seeks further private equity deals after IK partners investment (FT)
EY executives clash over mandatory retirement age in leadership race (FT)
General Atlantic takes controlling stake in Joe & the Juice (FT)
London Spac ditches attempt to raise funds for insurance deal (FT)
Demise of 147-year-old Stroock is boon for law firm rivals (Reuters)
Didi: strong result gives IPO hopeful a ticket to ride (Lex)
Corporate debt: PIK interest can dig borrowers out of trouble — temporarily (FT)
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