A note is doing the rounds from analysts at Bank of America Merrill Lynch. It suggests that now might be a good time for Barclays’ ex-Lehman bankers in the US to unpick the deal done by Bob Diamond and to go it alone.
You can see why this might be appealing. Barclays’ investment bank is due to have yet another strategic review and yet another chief executive. The organization is being led by a UK-focused ex-retail banker who has committed to keep the compensation ratio at less than 35%, even though U.S. rivals pay 50%. The higher bonuses paid to Barclays’ investment bankers in the New York have caused outrage in London. And RBS’s decision to de-emphasize the Greenwich Capital Markets might be seen as a forewarning of what happens when a parochial UK chief executive gets hold of an international business on the other side of the Atlantic.
We haven’t seen the BAML note, but we understand that it recommends that Barclays closes the Asian business, spins out the U.S. business and maintains a European investment banking franchise. The head of Barclays Asian business has reportedly retired ahead of the coming strategic review.
Not everyone thinks that a spin-out of the ex-Lehman business in the U.S. would be advisable, however. Chris Wheeler, a director at Mediobanca in London and ex-Lehman banker for 10 years, says Barclays’ US business would be, “too big to be to niche and too small to be a serious player.
“You need global coverage and global distribution,” adds Wheeler. A U.S.-focused business wouldn’t have that, and would need to build an international presence from scratch, he claims.
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