One on One with Barclays President Robert Diamond
Thursday, May 14, 2009
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SUSIE GHARIB: Big bucks are flowing into big brokerage firms these days as banks raise fresh capital to meet stress test requirements. Barclays, Britain's third largest bank is one of the beneficiaries thanks to its acquisition last fall of bankrupt Lehman Brothers. Earlier today, I talked with Barclays President Robert Diamond about that Lehman deal and the outlook for the financial sector. I began by asking him how 2009 is shaping up at his firm.
ROBERT DIAMOND, PRESIDENT, BARCLAYS: We're clearly seeing credit creation, particularly post the U.S. stress test results and the re- equitization of so many of the banks. It does feel a lot better in terms of liquidity. We're seeing good issuance, both from corporates and from governments in investment grade debt and equity and even seeing the beginning of below investment grade debt. So we are feeling better about 2009 than probably we were a quarter ago.
GHARIB: Bob, everyone wants to know when will the financial system get back to normal? When do you think that's going to happen?
DIAMOND: It's taken 18 months for to us get to this point and it's been very, very difficult. It's not going to be over in a month but I think we are well past the worst and we're well into recovery. And I think that's critically important for the American people because without a stronger, more confident banking system, we're to the going to see economic recovery.
GHARIB: I see that trading profits are strong not only here at Barclays but at Goldman Sachs, Morgan Stanley, JPMorgan. What could change that?
DIAMOND: The financial system is clearly recovering. And we're in a much better position today than we have been since this crisis began. There are still a lot of questions about the U.S. economy and the global economy. The issue around the auto companies is still out there to be resolved. And while we are probably more positive in terms of seeing signs of stabilization and recovery in the U.S. economy, others disagree with that. And so I think if unemployment went significantly higher, if industrial production dropped, it would create a very difficult environment for the commercial banks in the U.S.
GHARIB: Because of these new stress test requirements, there have been huge underwriting fees for investment firms that are raising capital for banks. How many of these deals are you involved in?
DIAMOND: Well, we're very active. And I think it's very positive for the business. The fact that banks are out raising equity, raising debt, strengthening their capital ratios, strengthening their balance sheet, you know, it goes back to what I said earlier, Susie. A stronger, more confident banking system drawing the line into the problems of the last year or so is critically important to get credit flowing, to get the U.S. economy going. And frankly we're all in this together. We're all trying to do what we can to get the economy moving again.
GHARIB: You told me that Barclays last minute acquisition of Lehman Brothers was transformational. What is the best thing that has come from that?
DIAMOND: It was a transformational deal and I think the sum and essence of it was for an institution like Barclays, for an investment bank like Barclays Capital whose great strength was in the UK and Europe, and was trying to build organically a presence here in the U.S. This put us into the very, very top tier with the most important corporate and institutional clients and it gave us a fantastic business in cash equities and M&A businesses that we didn't have in Barclays Capital.
GHARIB: There has been a lot of debate about the growing role of the U.S. government in business, whether you are talking about new standards, new regulations, or even getting involved in what executives get paid. Is this a good or bad development for the banking system?
DIAMOND: I think for those banks that have significant government ownership, they have to pay the price for that ownership. And certainly the government is going to have an agenda. And the taxpayer is going to have an agenda. I think separate from that is the government going to be involved in changes to the regulatory environment because of the lessons that we've learned over the last 16 to 18 months? Of course they are and of course there is change needed.
GHARIB: So as you look at the way that things are shaping up between Wall Street and Washington, is Barclays interested in having a bigger footprint in the U.S. or just staying away?
DIAMOND: Not at all. I think our board, John Varley (ph) and I all embraced a number of years ago that as we looked at our business around the world, there were a couple of areas that we were significantly underweight. One of those areas was the U.S. and the ability to acquire Lehman's U.S. business was exactly on strategy. And we want to have a bigger presence in the U.S.
GHARIB: Bob, thank you so much for your time.
DIAMOND: Thanks.
