Jerry del Missier, Barclays Capitals president who moved from London to New York in March to bolster its U.S. business and more tightly manage its credit exposures has quickly made a home in America. The 46-year-old, even-tempered Canadian is charged with dramatically expanding the British banks revenues in the U.S. by about 20 percent without acquisitions, and his efforts may already be paying off.
For the first time, Barcap has become a top ten player in the U.S. debt capital markets, excluding self-funded deals. The latest Dealogic ranking for the first half of 2008 puts Barcap in the seventh slot, with 228 deals worth $73 billion, good for a 6.27 percent market share. Del Missier believes his firm can become a top five player in investment-grade debt by 2011. The U.S. market is our biggest opportunity, because this is a two-to-three-year window where you can reposition your business. To not take advantage of that would be a golden opportunity missed, he says, declining to put a price tag on the rollout.
Del Missiers plans will get a much-needed boost from Barclays £4.5 billion ($9 billion) rights issue announced on June 25. The investment bank will sell 1.58 billion new ordinary shares, with more than half going into the hands of sovereign wealth fund Qatar Investment Authority. China Development Bank and Singapores Temasek Holdings will also buy newly issued shares to maintain their percentage holding of all outstanding shares of about 3 percent and 2 percent, respectively.
Half of the funds will be used to pursue growth opportunities in the U.S. and emerging markets.
Del Missier believes Barcaps diversified book with profitable foreign exchange and commodities divisions will help it better compete in the fixed-income market. Commodities revenues grew 20 percent in 2007, while currency revenues grew 60 percent.
To help manage the growth, Barcap plans to boost its staff, doubling the number of managing directors in its corporate investment banking division stateside this year alone. Since January it has made several key hires from banks hit hard by the credit crisis. On May 8 the firm poached Dominic Rispoli from Lehman Brothers, where he was most recently a managing director in the global retail and consumer group. Rispoli now heads Barcaps coverage for the retail industry. And on June 12, Barcap announced that it had picked up the health care team from Bear, Stearns & Co. Along with Patrick McMullan III, who now heads the unit, Ben Adams, Kevin Clarke and Frank Williams joined as managing directors.
However, questions remain over whether Barcap can attain its goals. This is the latest of several efforts by the firm to grab market share in the U.S.; none of the previous ones have been particularly successful. Barcaps expansion this time around is predicated on the assumption that one of the worst credit crises in 70 years will largely be resolved within three years but thats still up for debate. Brad Hintz, a New Yorkbased senior analyst at asset management firm AllianceBernstein, with $800 billion under management, believes it could take twice that much time for the bank to profit from the business. Because investors can easily price the vanilla debt, the banks efforts will pay off only if it leads to more-lucrative business, such as high-yield or structured credit transactions, he says, but both markets are still depressed. Theres a curious thing about debt underwriting, asserts Hintz. If you can use the investment-grade business to get in on an M&A deal, then the business will be profitable.