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AmericasJune 30 2008

Archibald Cox

No stranger to the banking world, Archibald Cox has been inspired to return to the sector as chairman of Barclays Americas. He tells Katherine Tully of his intent to expand the bank’s share of the market and build its position in the US as an international platform.
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Archibald Cox, who started as chairman of Barclays Americas at the beginning of May, was not planning a return to the banking industry. After all, he had already headed up Morgan Stanley International in London and First Boston earlier in his career. More recently, he served as president and CEO of Magnequench, a manufacturer of rare earth magnetic material and magnets, formed his own private equity company, Sextant Group, and served on the board of several other public and private corporates. He is 67 years old and certainly did not need to work again.

“I wasn’t exactly planning on coming back to the financial world, having left in 1995, but I’ve known [president of the bank] Bob Diamond since the beginning of his career from when he started at Morgan Stanley. We’ve remained friends. We were chatting one day and I was asking his advice about something, one thing led to another, and here were are,” laughs Mr Cox.

He replaces former chairman of the Americas, Chet Feldberg, who is retiring this year after serving as Barclays ­Americas chairman since May 2000. He is tasked with helping Barclays to achieve its stated aim of increasing earnings in the Americas as a percentage of growing group profits – which Mr Diamond described as the number one priority of the bank when it announced its 2007 full year results.

Big contributor

North America already contributes about one-third of Barclays Capital’s revenues but Mr Diamond thinks that with a number of competitors in the Americas badly affected by the ongoing credit crises, there is an opportunity for the bank to become a top three player there. “There’s a true commitment to building out the business in a sensible fashion and I think the fact that I’m here attests to that,” says Mr Cox.

That involves continuing to build its position in its investment banking and investment management businesses. Indeed, Mr Cox, who will report to Mr Diamond, will be a member of the ­Barclays investment banking executive committee. But it will also involve continuing to expand Barclaycard US and, increasingly, the private banking arm, Barclays Wealth, which has more of a presence in Europe and Asia than it has in the Americas.

Mr Cox says he is not convinced that he would have been tempted back into the industry by any other financial firm. But it was not just Mr Diamond’s influence that led him to take the job; he also thinks the Barclays name stands out for its commitment to clients, high ethical standards and strong execution – qualities that are more important than ever in today’s market.

“I am here for several reasons. It is because of Bob, the support of John Varley and the Barclays board, and what Barclays Capital has accomplished and the culture that has been created. I think it is a unique place. When you look around the financial world, I think Barclays Capital is very special.”

Mr Cox took the advice of a lot of other people in the organisation before joining, and now, four weeks into his new job, he has first-hand experience of that culture, having met all of the senior managers in London and New York. “Nothing I’ve seen in the last four weeks has led me to feel any differently about that. It is a terrific group of ­people,” he says.

The respect between Messrs Cox and Diamond is clearly mutual. When announcing Mr Cox’s appointment to the bank in April, Mr Diamond praised his deep experience, knowledge of the industry, his personal stature, as well as his track record in building successful business in the US and overseas.

Mr Cox is no stranger to expanding businesses – or enhancing international platforms in the banking business. After all, he set up and ran Morgan Stanley International back in 1977. He will also be involved in developing the business in Europe and Asia but his main focus will be the Americas.

Strength and scale

Mr Cox says that one challenge is to make people appreciate the strength and scale of the existing Barclays franchise in the Americas. “I would say that Barclays has been a great success in the Americas. For example, BGI [Barclays Global Investors] is the largest fund manager in the US, with over $3000bn in assets, yet very few people identify that with Barclays. Some people do not realise that iShares [BGI’s exchange traded fund product] is part of BGI. Yet it has $400bn of iShares assets under management, which alone would make it a large fund manager.”

In the capital markets and investment banking business in the Americas, Mr Cox points to areas of the business where the bank has been highly successful, such as commodities, foreign exchange, fixed income and asset-backed securities. But he thinks there is also plenty of room for growth.

“The bank doesn’t have quite the same position here as it does in Europe, where it is one of the leaders in the league tables.”

Mr Cox thinks that the investment bank and securities division is well positioned to take market share in the Americas in the primary and secondary markets, not least because the organisation is actually turning a profit. “As far as we know, Barclays Capital is one of the few investment banks that made money in the first quarter,” he says.

He also points out that Barclays has made a lot less write-downs than some competitors, even in cases where its exposure has been as big or even bigger, and says he is impressed with its risk management. The bank wrote down £2.3bn ($4.6bn) of credit-related assets in 2007. Net credit losses in the first quarter of 2008 were more than £1m.

Bold ventures

The bank is now looking at taking on new business in some areas where competitors have retrenched, weakened by credit write-downs, and are still licking their wounds. For example, in June the bank announced that it had raised $1bn for an inaugural North American credit investment fund, within its Barclays Structured Principal Investing Unit. The unit is part of the bank’s US leveraged finance platform, which combines origination, distribution, trading and principal investing, and is headed up by Rick Van Zijl and Joe McGrath, co-heads of US leveraged finance.

The inaugural Barclays Structured Principal Investing Fund will partner with financial sponsors to invest between $20m and $150m in opportunities ranging from uni-tranche, second lien and mezzanine debt to holding company notes and structured preferred stock, as well as making some private equity co-investments in partnership with leading financial sponsors. “We’re looking more at the leveraged finance business,” says Mr Cox. “Barclays said ‘no’ a lot of times when other banks were saying ‘yes’, so now we’re in a position to look at sensible transactions, which other institutions can’t.”

More expansion

There are other areas of expansion. One is the energy sector, for which the bank is hiring more staff at its Houston office. There is going to be a further drive into equities and prime brokerage.

Another focus is the corporate finance coverage areas. Mr Cox says: “We just hired a managing director of ­corporate finance in the retail sector and we’re looking at more hires in corporate finance.” Dominic Rispoli joined ­Barclays Capital in New York at the beginning of May to become managing director, heading coverage of the retail industry. He joined from Lehman Brothers, where he was most recently a managing director in the global retail and consumer group.

Barclaycard is another part of the business that has experienced significant growth in the Americas, where it solely provides affinity cards for major corporations, such as LL Bean, which is a new client, Barnes & Noble and US Air. Mr Cox says that it is a profitable business and thinks the division will continue to do well in the Americas, irrespective of current consumer credit problems, because of the bank’s impressive track record in risk management.

Mr Cox says his first priority, however, is to meet as many people face to face within the bank as possible. On the Sunday after talking to The Banker, he was due to make his second trip to London in five weeks.

He is clearly enthused by his new role. “I’ve got a tremendous amount of energy. I think that I’ve got a lot to contribute to Barclays, given its particular situation, and that I will have a lot of fun doing it,” he says.

CAREER HISTORY

2008: Chairman, Barclays Americas.

1995: Became president and CEO of Magnequench.

1993: Formed Sextant Group, a financial advisory and private equity firm.

1990: Appointed president and CEO at The First Boston Corporation and a member of the group executive board of CS First Boston Group; served on board of Securities Industry Association in the US.

1986: Alongside his role as CEO of Morgan Stanley International, Mr Cox served for two years on the board of the ­Securities and Investment Board, responsible for regulating securities and other non-banking financial ­services businesses in the UK.

1977: Launched Morgan Stanley International in London and served as its chief executive officer. He stayed at Morgan Stanley until 1988.

1973: He was asked to build the Morgan Stanley institutional equity business and assumed responsibility for all equity sales and trading.

1964: Started career at Morgan Stanley.

Pre-1964: Bachelor’s degree in Economics from Harvard College and a MBA from the Harvard Business School.

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