Barclays cuts Swiss debt operations

Thu Feb 6, 2014 5:37am EST

Related Topics

LONDON, Feb 6 (IFR) - Barclays has closed its Zurich debt origination and trading operation less than four years after opening it, as the bank seeks to exit unprofitable businesses.

The shutdown of Barclays' Swiss desk is the latest in a string of closures of marginal operations by various investment banks hit by harsher capital requirements and comes after the bank began a cost-cutting programme that could see up to 400 job reductions in corporate banking.

Barclays had struggled in the Swiss market since it publicly announced its start-up there in July 2010. So far this year, it has only been involved in one new issue out of the 45 priced - the EIB Climate Awareness Bond, where it acted alongside Credit Suisse and Deutsche Bank.

It currently sits at number eight in the league tables. It finished 2013 at number nine with a 2.1% share of the market, ahead of VTB Capital, which only gets involved in a few Russian deals, mainly VTB's, in the franc.

One syndicate official at a rival Zurich-based bank said that it had only been a matter of time for Barclays. Credit Suisse, UBS, ZKB and, to some extent, Raiffeisen Schweiz's hold on the market serves well to keep foreign banks at bay.

Meanwhile, another Swiss banker said that projected growth from when it started was overly optimistic. While 2009 saw more than CHF63bn priced by international credits, 2010 was down 26%, at CHF46.6bn.

The following years saw further decline, with only CHF33.1bn and CHF35.8bn printed in 2011 and 2012, respectively. Those years were on average down over 45% from the 2009 highs.

"The fee cake has not grown over the years" said a DCM official at a Swiss bank. "In fact, it has shrunk rather dramatically, especially if you only have access to the international sector. It used to be that if you missed a deal, another would crop up fairly quickly. Nowadays, those windows of opportunity get slammed shut pretty fast and it can be weeks until a similar trade comes your way."

BASIS SHIFT

The decline in international supply was further exacerbated by the Swiss National Bank's decision to put a floor on the value of the franc in 2011. With rates hitting all-time lows, the shift in the cross-currency basis swap made issuance in Swiss francs even less cost-effective for many borrowers.

The low rates would have necessitated a negative coupon for some Triple A rated borrowers, not a palatable or viable proposition for many investors.

Others bankers blamed the size of Barclays' operation, saying it did not have the critical mass required to really perform in the small market.

Despite Barclays' set-back, however, other foreign institutions in Switzerland are not worried. A banker at one of them said that the set-up and focus for most of the remainder is different from that of Barclays'.

Commerzbank and HSBC only restarted their small operations in 2013. Both are thought to be concentrating on emerging markets where they have a global franchise, with Commerzbank focusing on Eastern Europe and HSBC on Asia.

Deutsche Bank, BNP Paribas and RBS are all old hands in the Swiss market and have their own niches to fill. But Barclays' set-up pitted Swiss franc deals head to head against the major currencies, so "if you won a Swiss franc mandate, you had already lost", opined one Zurich-based trader, given that it had likely come at the expense of another transaction.

The small team of three, which included Martin Meili, who joined the bank from RBS as head of syndicate in 2010, is understood to have left their roles at the bank, although their future remains undecided.

Barclays declined to comment.

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.