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Barclays becomes Europe's only major investment bank as Deutsche retreats

The German bank's plans to close down its equities trading arm will leave Barclays as the only European bank in the so-called 'bulge bracket' of heavyweight multi-national financiers

Deutsche Bank
Deutsche's restructuring will involve axing 18,000 jobs

Barclays PLC (LON:BARC) will become Europe’s only investment bank in the heavyweight 'bulge bracket' following plans by Deutsche Bank to exit its equities trading business and axe 18,000 jobs.

On Sunday, the German lender confirmed plans to lay off thousands of staff as part of a radical restructuring that will also involve the hiving off of €74bn in risk-weighted assets into a newly created ‘bad bank’ and €6bn in cost cuts over the next three years.

READ: Activist investor Edward Bramson suffers defeat in bid for board seat at Barclays

The move also followed a failed attempt by Deutsche to merge with rival Commerzbank in April, with the two sides saying that the deal was too risky despite its support from the German government.

Many of the bank’s planned layoffs are scheduled to hit its London office, a major hub of its equities trading arm within a UK division that currently employs around 8,000 people.

In a statement on Monday relating to the planned job cuts, Deutsche said it would still retain “a significant presence” in the City of London, where it is one of the Square Mile’s largest employers.

"We regret that the changes we are making will affect some of our colleagues and we will do everything we can to support them," the bank added.

Deutsche’s retreat from the space now leaves Barclays in a prime position to siphon off clients of the bank who will now be looking for another provider.

Investors also seem to have taken note of a potential boost for the British bank, with the shares rising 1% to 158.7p in early trading on Monday.

Neil Wilson, chief market analyst at Markets.com, says that Deutsche’s woes were “good news” for Barclays, adding that the FTSE 100 firm was “the only one” left standing among Europe’s investment banks who have tried to take on the US giants on Wall Street.

Wilson also said that Deutsche’s exit left the US investment banks, which include 'bulge bracket' titans such as JP Morgan Chase & Co (NYSE:JPM), Morgan Stanley (NYSE:MS) and Citigroup Inc (NYSE:C) firmly “in charge” for the foreseeable future.

Restructuring will not help exposure to declining industry, says broker

In a note to clients, analysts at Berenberg said that while Deutsche's efforts to restructure the business were "more radical" than in previous years, it did not change the fact that the bank was still exposed to investment banking, an industry in "structural decline", and German retail banking where marginal pricing was to be "break-even", a combination that they said was "unattractive" for investors.

Analysts added that the new strategy carried "significant execution risk" and left the bank with "little room for error on capital".

--Adds analyst comment--

Quick facts: Barclays PLC

Price: 168.18 GBX

LSE:BARC
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Market Cap: £29.05 billion
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