Barclays Leapfrogs U.S. Rivals for Home Win in Equity Markets

(Bloomberg) -- Barclays Plc has notched a very British win in 2020.

The London-based bank currently sits at the top of the rankings for equity offerings in the U.K., up from 4th place last year, according to data compiled by Bloomberg. If the trend continues, it would be only the second time in the past two decades Barclays has ended up as No. 1 for a full year.

Barclays is leading rivals like Goldman Sachs Group Inc., Morgan Stanley and JPMorgan Chase & Co. in a year in which the engine of revenue generation -- initial public offerings -- has been spluttering. The number of London IPOs is down 58% this year, the Bloomberg data show, because of the impact of the coronavirus on equity market sentiment.

In contrast, the number of so-called accelerated bookbuilds in the U.K. is up 74% as companies seek to raise funds to help them weather the economic downturn. Barclays has found itself well-placed to advise on the emergency fundraisings in part thanks to its corporate broking team.

“We have a strong corporate broking franchise around leisure, retail and business services which have all been very busy this year,” Tom Johnson, head of equity capital markets for Europe, the Middle East and Africa for Barclays, said in a phone interview.

Wall Street Dominance

Corporate broking is a uniquely British corner of investment banking, whereby firms provide go-to advice to listed companies on everything from strategy to shareholder engagement. They do so on an ongoing basis for nominal fees, in the hope that the relationships will secure them more lucrative roles on capital market transactions and acquisitions.

A number of Barclays’s corporate broking clients have been heavily exposed to the Covid-19 crisis. Its clients include catering firms Compass Group Plc and SSP Group Plc and travel retailer WH Smith Plc, “which unfortunately for them were at the sharp end of the crisis,” Johnson said. All three raised fresh equity this year.

In a pandemic-free environment, the capital market cycle would see transactions of various sizes as well as more IPOs, which could also explain why the usual banks haven’t managed to maintain their prime spots in the league table. Wall Street’s titans have been dominating the investment banking scene in Europe at the expense of local advisers, which makes Barclays’s current standing in the U.K. -- a key market -- all the rarer.

‘Second Storm’

Barclays has been strengthening its ECM business in recent years by investing in its research teams and making senior hires from rivals, including veteran bankers like Ken Brown from Nomura Holdings Inc. and Manuel Esteve from JPMorgan Chase & Co.

The bank and its rivals could be about to benefit from a strong second half, with Johnson predicting a comeback in IPOs and rights issues.

“We are expecting bigger deals, involving companies that need more capital, so they will likely come in the form of rights issues,” he said. “There’s also a chance that like the U.S. market, we will start seeing IPOs back on the agenda, so we are going to continue to see a fairly active ECM market.”

Barclays’s own chief executive officer, Jes Staley, struck a cautious tone on the U.K. economy during a Bloomberg Television interview in late June: “We recovered more right now than what we would have thought a little bit ago, but there is that second storm coming in a couple of months.”

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