Barclays assets increase due to derivatives, but profits fall

The implementation of Barclays’ strategy update announced by chief executive Antony Jenkins in mid-2014 – which included the restructuring and headcount reduction of 2,000 employees within investment banking and wealth management and was followed by a number of redundancies in structured products in London, Hong Kong and New York – has rebalanced the Barclays' business mix despite profit before tax decreasing by 32% to £1.3bn, according to the bank’s 2014 results.

The bank’s total assets increased by 4% to £455.7bn as a result of an increase in derivatives due to forward interest rates and a strengthening of US dollar against major currencies, despite £44.6bn in senior unsecured (privately placed) liabilities including structured notes of £35bn, £9bn of which are set to mature within one year.

In structured products, the bank suffered the impact of the restructuring with a significant slowdown in activity, especially in Europe and the UK. As part of the reorganisation, Philippe El-Asmar, former head of distribution Asia-Pacific left the bank, following Kevin Burke, former global head of investor solutions and funds and advisory distribution, and a number of senior staffers including David Wood, former head of direct and listed solutions at Barclays in London, who joined Societe Generale as head of electronic business, cross-asset solutions.

The bank concluded this phase of the restructuring with the offloading in September of its retail banking, wealth and investment management and corporate banking businesses in Spain to CaixaBank (formerly La Caixa) which provided the Spanish lender with more than €1.5bn of estimated assets under management (AUM) in structured products.

The reorganisation was completed during the summer when the bank relaunched equities and funds structured (EFS) markets including non-linear derivative solutions (structured notes, principal protected products, equity and hybrid structured options, credit solutions and structured solutions) for investor clients such as asset managers, insurers, private banks and other financial intermediaries; quantitative indices and strategies across-asset classes, including cross-asset risk premium portfolios for endowments, protected long-term savings products for pension funds, customised protected solutions for insurers and structured investments linked to mutual and hedge funds; and structured financing and collateral solutions including global margin, collared financings and multi-asset collateral management.

Under the new set-up, Corinne Grain was appointed head of EFS sales, Europe, Middle East and Africa (EMEA) with global responsibility for sales of non-linear derivative solutions, working with Omar Gzouli, head of trading, to implement a strategy from origination to distribution. Grain reports to Mike Di Iorio, head of equities distribution.

In the US, Johnny Wu was appointed head of EFS sales, Americas, reporting to Di Iorio and Eric Schlanger, head of equities, Americas.

In Asia-Pacific, Yasuhiro Ishibashi, was appointed head of EFS sales; David Campbell was made interim head of distribution for Asia Pacific; Samson Yip was made head of North Asia distribution, reporting to Campbell; and Jeffrey Juan was made head of EFS sales for the region, reporting to Ishibashi, who in turn reports to Di Iorio.
At a product development level, Richard Couzens, was appointed co-head of the expanded global product origination team across EFS alongside Brad Hurrell, formerly head of structuring, EMEA.

Barclays also reported in its 2014 results that it brought to market three socially responsible products including the Barclays Women in Leadership Index and ETNs; Barclays Return on Disability ETNs and Barclays/MSCI Green Bond Benchmark Indices.

SRP data shows that Barclays issued 969 tranche-based structured products across jurisdictions and sold £3.8bn in 2014. In January, the UK bank resumed its activity in Germany, where it had not been active since July 2014, with a knockout/reverse convertible express certificate linked to the Eurostoxx 50 index.

The bank reported a 12% fall in total income to £7.5bn, including the impact of depreciation of average US dollar against UK sterling. Banking income increased by 2% to £2.5bn as lower fair value losses on hedges and higher interest offset lower fee income. However, markets income decreased 18% to £5bn as a result of a 17% fall in credit driven by reduced volatility and client activity, as well as a 11% fall in equities due to lower client volumes and a 24% fall in macro reflecting subdued client activity and lower volatility in currency markets in the first half of the year, according to King.

Total operating expenses also decreased by 6% to £6.2bn, reflecting a 9% reduction in compensation costs, business restructuring, continued rationalisation of the technology platform and real estate infrastructure, and depreciation of the US dollar against sterling.

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Barclays assets increase due to derivatives, but profits fall