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%,
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."
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.