Former rivals steer Barclays through uncertain times

Lionel Derimais

Crispin Osborne (left) and Sam Dean

The former head of JP Morgan’s investment bank arrived at Barclays in December 2015 and has since been hands-on with its corporate and investment banking business, managers say. He joins calls with clients, helps to pitch for business and takes a keen interest in how the division is run.

This comes from necessity as much as choice. In March, New York-based investment bank boss Tom King left Barclays. Until an external replacement is made – which Staley has said is in the works – the chief executive oversees the division himself.

Fortunately for Staley, Barclays’ investment bank has a relatively stable team of senior managers that were in place beneath King. Its top bankers in Europe have all been with the business for several years, including Richard Taylor, the London-based co-head of global banking; John Langley, head of global finance and risk solutions; Makram Azar, chairman of banking in Europe, the Middle East and Africa; and Matthew Ponsonby, former Emea M&A head and now vice-chairman and chief operating officer of banking.

Emea banking co-heads Sam Dean and Crispin Osborne have seven and six years at Barclays under their respective belts – and have now spent a little more than a year as a team driving the bank’s corporate finance activities in the region, including its work in the capital markets and M&A advice.

They still consider the Barclays investment bank a young business, bulked out by the acquisition of Lehman Brothers’ US investment banking and trading business in 2008, and starting a push into M&A and ECM the following year.

Sitting in the investment bank’s base on North Colonnade in London’s Canary Wharf in early June, Dean and Osborne acknowledged the high degree of change the group has been under in recent years and the pressures that places on the banking business.

Osborne said: “We were dealing with the potential for quite a lot of incremental change. Plus we had a pretty difficult market backdrop. It’s much easier to win market share in a busier market. If there’s more business to do and you’re a newer entrant, it’s easier to gain share than in a market that’s shrinking with less business to go around.”

During Dean and Osborne’s time with Barclays, the bank has had four chief executives – five if John McFarlane’s near-half-year stint as executive chairman between the departure of Antony Jenkins and arrival of Staley is included.

Dean said: “Of course, as an institution we have seen huge change in recent years, from senior management to culture. But within the Emea banking division, we have had a very consistent team and strategy ever since the Lehman acquisition.”

Barclays’ share of the investment banking revenue pool in Emea has grown from roughly 3.8% when Dean and Osborne took their co-head jobs in April 2015 to 5.4% during the second quarter of 2016. The bank has been in the top-five banks for regional revenues across debt and equity capital markets, M&A and loans for each of the past four quarters, ranking third in the three months to June 30. “We both feel good about the past 12 months,” Osborne said.

He added: “League tables aren’t the be all and end all. But we think a top-five position is consistent with being credible and relevant to major clients around our geography. It looks look we are all in for another challenging second half but, touch wood, we feel we’ve started the year well and can hold our ground.”

Debt capital markets remain the bedrock of the Emea banking business. But Barclays has been gaining share in equity markets and advisory work as well.

Dean arrived in 2009 to build the nascent equity business. The bank was a bookrunner on just two initial public offerings on Emea stock exchanges in 2010, according to data firm Dealogic, but that figure grew to a record 13 in 2015. In Emea M&A the bank has risen from 12th place on Dealogic’s advisory activity rankings in 2010 to sixth in 2015.

That gives the bank plenty of room for growth, Dean said. But it also piles on the pressure. “We have prized seamless execution above everything,” Dean said. “We have staffed deals with MDs when VPs have turned up from our competitors. If we had executed badly on our first IPO in the Netherlands, for example, then word would have spread quickly around Amsterdam and it becomes really hard to get another mandate. Fortunately the opposite was true.”

Indeed, Barclays’ first IPO on the Dutch exchange, of optician chain GrandVision, priced towards the top end of the range in February 2015. Since then the bank has worked on three other listings on the market.

In M&A, too, the bank has been building relationships. In 2013 it won its first mandate from Deutsche Telekom, advising its Greek subsidiary OTE on the €215 million sale of its Hellas Sat satellite business. That laid the groundwork for the bank to advise Deutsche Telekom the following year on its £12.5 billion sale of the Everything Everywhere – or EE – network to BT Group.

Osborne said: “You have to earn the right to work on something like Everything Everywhere. If you’ve never completed something strategic for a major corporate, the chance of you being on something significant or transformative is limited. A lot of our groundwork has been making sure we demonstrate our execution credibility for our clients to position the firm to help the client again on something more significant.”

Dean added: “With many clients we still have to do our first M&A trade. To get to a credible, mature ECM and M&A business takes 10 years. We’re just over halfway through and we think we’re nicely on track. All we have to do is keep executing really well.”

Fierce competitors

Dean and Osborne knew each other well before joining Barclays. In the 1990s both were running syndicate desks – Dean at Kleinwort Benson and then Citi and Osborne at Credit Suisse First Boston. Dean recalls Osborne being one of the few peers he saw as a worthy rival: “We were strong competitors, trying to prove to our clients that we had the more powerful distribution team and the better market judgment.”

Having joined Barclays as co-head of ECM in 2009, Dean took a year-long sabbatical in late 2013 and returned to the bank as chairman of global finance and risk solutions. Osborne had joined as head of investment banking for central and eastern Europe, the Middle East and Africa, then moved to run banking for continental Europe.

They were offered the Emea banking co-head roles in March 2015. Richard Taylor, who had held the role, had managed the business on an interim basis since being promoted to co-head of global banking in 2014.

“I’ll be honest,” Osborne said. “When Richard and Joe [McGrath, global banking co-head] asked me to do this with Sam, I did have some questions. Prior to joining Barclays we’d both been fierce competitors. We were now colleagues who sometimes had healthy disagreements on certain topics. I asked myself the question: can we make this work? I’m sure Sam did too.

“But we sat down and said the only way we can do this is by working closely together and presenting a unified front. We always respect each other’s views and I’d say 90% of the time we agree. The most important thing is that we both see the business in the same way.”

Indeed, relaxed in conversation and eager to trade compliments, there is little to suggest that these co-heads have reason to bump heads. That is just as well given the work they have ahead.

The Brexit vote adds more uncertainty to the outlook for the investment banking industry, although a statement from Staley after the referendum result said Barclays’ strategy of growing a “transatlantic consumer, corporate and investment bank” anchored in the UK and US “remains the same”.

Speaking at the bank’s annual meeting in April, Staley had already said he was “accelerating” the strategy set out for the investment bank by Jenkins in 2014, focusing the business on the UK and US.

The need to “continue to improve the returns in our corporate and investment bank” was a priority, Staley added. The investment bank produced a return on equity of 5.6% in 2015, according to the bank’s most recent annual report – more than double the 2.7% achieved in 2014 but “still substandard”, according to McFarlane writing in that report.

Dean and Osborne know that must change, and want their direct reports to know it too.

Osborne said: “Historically, investment banks and banking divisions in particular were only managed [according] to revenue and league table. Now we think about market share as a measure of your relevance, not as a measure in and of itself. Then we think about returns. We have to, because the challenge in the overall industry is extreme around capital.”

He added: “If your line banker sitting in somewhere like Milan or Paris isn’t asking whether a potential assignment is a good use of their time and whether our efforts with a client hits the right return over the cycle, we’re not managing the business in the right way. We have to encourage that returns culture all the way down through the organisation and that message is really getting through.”

The message appears to be hitting home. Dean cites a country head who, in a recent half-year review, pointed before any other achievement to the fact that the bank’s business in that country had delivered better returns than any other in Europe.

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