Barclays is looking to take on a $20 billion portion of Deutsche Bank’s prime brokerage business, planning to become Europe’s premier investment bank, rivalling US competitors.
After its victory over activist shareholder Edward Bramson, who failed in his bid to dismantle the British lender’s trading operations, Barclays is trying to build up its business by serving hedge funds. The British bank, run by ex-J.P. Morgan executive Jes Staley, has persuaded hedge fund clients with $20 billion in balances at Deutsche Bank to move to Barclays, people with knowledge of the situation told Reuters.
The chunk is to become the largest such defection set off by Deutsche Bank’s announcement this month that it was retreating from the equities trading business. Germany’s flagship lender said on July 7 that it is to cut its equities trading business as part of a major restructuring and that BNP Paribas had signed a preliminary deal to serve prime finance and electronic equities clients impacted by the plan. The overall size of the business is 150 billion euros ($167 billion), according to a Bloomberg report.
However, some of Deutsche Bank’s clients are weighing alternatives to shifting their business over to Barclays, sources familiar with the matter said.
“It is not unexpected and perfectly natural that some clients may wish to move balances to other providers as a temporary measure while our discussions with BNP Paribas are ongoing,” a spokesman for Deutsche Bank told Reuters.
Catering to hedge funds has been a priority for investment banks as it has become the single biggest source of equities revenue. Industry data provider Coalition reported that the world’s 12 largest investment banks produced $18.3 billion in prime services revenue last year.