Barclays is leaning further into equities, with the CEO reminding investors it is still "the house that fixed income built." The bank said almost all of its stock-trading boost came from equity derivatives and prime financing, a mix strong enough to beat analyst forecasts on Thursday.
Equities revenue climbed 47% from a year ago, even as fixed income slid 19%. Volatility in tech shares has been a tailwind for highly levered hedge funds, and that activity has flowed through trading desks across Wall Street.
Barclays has prioritized prime financing, and people familiar said earlier this month that after hitting capacity limits, the bank shifted balance-sheet resources in recent months away from macro traders and toward its prime platform in Asia. The bank also told investors that 98 of its top 100 clients maintain financing ties with Barclays, per a presentation.
Barclays' fixed income decline was the steepest year over year among big Wall Street firms, and executives pointed to soft spots in credit and in European rates. Across Wall Street, prime financing is drawing attention as well: last week, Goldman Sachs' business that extends credit to hedge funds overtook its equities arm, marking the first time on record.
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In plain English: the profit center is shifting. Equities and prime financing are carrying more of the load, while traditional rate and credit trading cooled. If your holdings are tied to banks with big trading arms, pay attention to who is capturing volatile equity flow and who is exposed to weaker fixed income.
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