Barclays was waiting for its investment bankers to perform. That hasn’t happened

When Barclays CEO, C.S. Venkatakrishnan, presented Barclays’ full year results for 2024 in February, he indicated that he was expected previous years’ purchases of investment bankers to deliver revenues in 2025. That hasn’t happened. Today’s set of second quarter/first half results from Barclays show the investment banking division shrinking rather than pulling its weight.

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As the chart below shows, in revenue growth terms, Barclays’ equity capital markets did worse than all rivals to report so far in the second quarter. Its M&A bankers did not do well. Nor did its debt capital markets bankers.

Barclays’ equities and fixed income traders, however, had a fine quarter. 

Barclays’ blamed the poor performance of its ECM bankers on a strong comparator quarter in Q2 2024, when it earned big fees on a large UK rights issue, and said that announced M&A deals have yet to result in fees. However, the poor performance of the investment bankers looks problematic given that Barclays’ strategy is all about generating higher revenues from investment banking activities and driving higher returns on a smaller allocation of capital.

Instead, it’s Barclays’ salespeople and traders who are carrying things. Macro, credit, prime and equity derivatives were all strong and trading revenues rose by double digits even as Barclays crimped the capital allocated to the investment bank, with allocated tangible equity falling from £30bn to £28.7bn and risk weighted assets falling from £203bn to £196bn. 

Traders will seemingly get paid for their efforts: Barclays said today that operating expenses increased 3% in the investment bank, in part due to “higher performance costs.” 

While Barclays’ traders can look forward to year-end, its investment bankers have reason for apprehension. The Barclays Group has £150m of costs still to take out in the second half of 2025, and although Venkat is patiently waiting for bankers to perform, that patience may wear thin. In the meantime, the costs that have been removed have been negated by inflation and currency changes. 

Today’s results reveal why Barclays needs a third opinion from McKinsey & Co. on its cost-cutting. They also reveal why the bank just hired Alex Ham from Numis to help revive its ECM business. Venkat isn’t averse to investing in new bankers to pursue his strategy, but they will need to produce returns at some point.

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