Barclays Plc sees signs of a rebound in mergers and acquisitions and a thawing of equity capital markets — a welcome turnaround after a persistent slump sapped investment banking revenue across the industry.
Banks are more willing to lend at terms that are more in sync with investors' needs, Chief Executive C.S. Venkatakrishnan said at a conference the London-based firm hosted Tuesday. Investors are flush with cash and asset prices have fallen to more acceptable levels, he said.
"There's activity under the surface," Venkatakrishnan said. "The ducks are paddling furiously, and we'll just see in the next few months how much they move."
Barclays' investment banking revenue declined 15% to £472 million ($589 million) in the second quarter, driven by a 45% slump in advisory fees. The results were in line with rivals, and the industry has turned to job cuts in response to the prolonged drought in deals and capital markets activity.
The pending listings of Arm Holdings and Instacart signal a thaw in the market for initial public offerings, which had been in a deep freeze for more than a year. Investors' reception to those listings could set the stage for the dozens of companies that have been forced to stay private.
Barclays has a price-to-book ratio of about 44%, indicating that it's worth less than investors would expect to receive if the firm liquidated its assets. Under Venkatakrishnan, the lender has embarked on a wide-ranging review of its operations in a bid to bolster its stock.
Shares of Barclays rose 2.5% Tuesday to close at £153.58, paring this year's decline to 3.1%.
Venkatakrishnan said he and Anna Cross, the firm's finance director, are working on revising some profitability targets, including those tied to the bank's return on tangible equity and shareholder returns.
"We've been very clear that some of our financial targets and our guidance needs a bit of revision," Venkatakrishnan said. "It's something we're working on."
