Barclays’ head of UK investment banking enjoys unlikely success story

To the casual observer, 2016 might have seemed a difficult year in which to become head of UK investment banking at one of the country’s highest profile financial firms. The Brexit referendum unleashed a political storm, hit economic forecasts and created great uncertainty about the UK financial sector’s ability to access the EU single market.

This was Alisdair Gayne’s exact situation, but speaking to him at Barclays’ headquarters, he is firmly focused on the advancements being made within his division. With good reason: efforts to transform Barclays from a debt house to a more balanced investment bank are bearing fruit, its key products have proved resilient to the Brexit fallout, and collaboration with Barclays’ corporate bank has become stronger.

Home ground momentum

Mr Gayne’s optimism can, in part, be explained by his division’s natural importance to the group as a whole. “As a UK bank, if we don’t get it right here then we don’t really have a licence to do it anywhere else,” he says.  

Barclays’ investment bank has certainly got a lot right in its home market over the past 12 months. For the first time since 2012 it leads the UK investment banking revenue ranking with a 9.5% market share (as of early November 2017, based on figures from Dealogic). This is something Mr Gayne attributes to his division’s rounded offering. “It’s the combination of a very robust and diverse portfolio of businesses that goes right across the advisory, financing and risk management spectrum, and the fact that we are not overly reliant on mergers and acquisitions [M&A] which, in terms of fees at least, has seen a slowdown,” he says. 

Indeed, in UK leveraged finance Barclays ranks first by fees and volumes, in equity capital markets (ECM) third by fees and volumes, in debt capital markets (DCM) it retains its historic top spot and it is climbing the M&A rankings. This is no mean feat given the relative immaturity of Barclays’ European equity and advisory platforms. After selling the bulk of these operations to Credit Suisse in 1998, it started to rebuild them a decade later following its acquisition of Lehman Brothers’ investment banking platform in North America.

A rejuvenated bank

This ramping up of non-debt business means Barclays’ investment bank is a completely different beast today than it was in 2009 when Mr Gayne joined, and not just because it has reduced its derivatives book in the same manner as its peers. “If you ask most investment bankers how their firms have changed over that period, they all would say markedly, because their risk management business will have shrunk and their capital headwinds become tougher,” says Mr Gayne, who is also head of corporate broking and co-head of corporate banking. “We’ve had to contend with that, but at the same time have actually been growing new business streams.”

Its strengthening equity franchise saw it act as joint bookrunner on Alfa Financial Software’s £254m ($336m) listing, the UK’s biggest tech initial public offering (IPO) since 2015. Its M&A team have advised on Tesco’s £3.7bn merger with food wholesaler Booker, Amec Foster Wheeler’s £2.2bn tie-up with Wood Group, and US payments firm Vantiv’s £9.3bn offer to buy Worldpay.

The internal changes that have paved the way for mandates such as these mean that, irrespective of industry-wide challenges such as tougher regulations and reduced margins, morale and motivation within the investment bank has been upbeat. “Despite the headwinds, for those in the trenches of the banking business and working with clients day to day it’s been quite a different experience over the past eight years as they’ve been focused on growing the business,” says Mr Gayne. “We have something to go out and win, while competitors have been more internally focused on dealing with the headwinds.”

Broking disruptor 

Perhaps its biggest win has been in corporate broking, the business that Mr Gayne was hired to establish in 2009. A uniquely UK concept, corporate brokers advise public company clients on everything from pitching their equity story to building a diverse shareholder register, navigating listing rules to managing results announcements.

On paper, entering the sector makes perfect business sense. A corporate broker has regular dialogue with the C-suite of the UK’s biggest listed companies, with the end goal of helping execute their strategy. “If you are doing a good job on that front, it becomes a trusted relationship which puts you in a better position to offer strategic advice to those clients,” says Mr Gayne. “You are more likely to get business out of that client set, whether it's M&A, raising equity, refinancing debt and so on.”

But it is a difficult business to start from scratch. The market is built on long-term relationships, so corporates do not tend to change their brokers very often. FTSE 100 firms have only two corporate brokers, while those in the FTSE 250 have one or two. Furthermore, Barclays had no established equities or advisory business to leverage, unlike some other new entrants. Nevertheless, from nothing, Mr Gayne led the build-out of a business which, by the start of November, had 21 FTSE 100 brokerships and is ranked number three in the UK. Since it started pitching in 2010, Barclays has won more FTSE 350 clients each year than any other corporate broker.

Mr Gayne regards this success against the odds as one of his biggest career achievements. “We got a lot of stick when we announced we were moving into corporate broking,” he says. “Some competitors may have been dismissive on the likelihood of us making it a success, and I think we have confounded everyone by the scale of what we have achieved over a very short period of time.”

Corporate opportunities

To achieve his goal of making Barclays consistently the number one investment bank in the UK, Mr Gayne hopes to take advantage of its stronger alignment with the company's corporate bank. While the two divisions have always worked together closely, since May 2016 a number of senior appointments and mandate extensions have formalised this partnership by bringing them under the same umbrella. The latest development, in October, saw Mr Gayne appointed co-head of corporate banking (on top of his investment banking and broking roles).

This new set-up increases the investment bank’s opportunities to offer services to Barclays’ sizeable and well-established corporate banking client base. “That potentially gives us another leg-up in our UK business, which should make us better positioned to capture more advisory business in the mid-cap space, whether it is equity raising, M&A or leveraged finance,” says Mr Gayne. “When you look around the market, it’s hard to find another bank that can say it has such a big, organic opportunity that it hasn’t fully tapped into yet.”

This is already starting to produce results, as shown by Barclays’ strong performance in UK leveraged finance throughout 2017: highlights include debut high-yield bonds from telecoms firm TalkTalk and energy company Drax. Mr Gayne says this is not only a function of its strong product capability, but also because activity over the past year has been driven by mid-caps with whom, because of the strength of Barclays’ corporate banking business, the investment bank has a strong debt relationship.

Brexit reality

The US presidential race, elections in key EU member states and Brexit have made for a tumultuous 12 months of geopolitics, with the latter naturally being the biggest potential concern for UK financial activity. But while the referendum was followed by a few quiet weeks, Mr Gayne is among the chorus of investment bankers that believe local DCM and ECM volumes over the past 17 months have been stronger than many forecast in July 2016. “If we remind ourselves how we felt back then, our expectations for this year would have been quite depressing. But capital markets have been remarkably resilient,” he says. “The fear of the referendum and Brexit affected the IPO market more last year than the reality of Brexit has done this year.”

M&A has seen a slowdown in domestically focused deals, but large cross-border transactions have continued. This is consistent with Mr Gayne’s observation that many firms with a UK connection are refusing to let Brexit uncertainty interfere with their strategic plans. However, routine and smaller scale investment decisions are more likely to be affected. 

“Companies have realised that they can either sit on their hands and face the risk of doing that for four years while the world moves on, or they can take the view that Brexit will be whatever Brexit will be,” says Mr Gayne. “Most corporates have gone with the latter and continue to pursue their strategy. If that strategy involves buying assets overseas, then they are continuing to do that.”