New York will benefit at London’s expense after Brexit, says Diamond
Bob Diamond, the architect of Barclays Plc’s investment bank for more than a decade in London, says Brexit will hurt the British capital more than people expect, with lawyers likely to join bankers in moving away.
"People are beginning to understand Brexit is going to be far more profound and long-lasting than they thought," Diamond said in a phone interview from New York on Thursday. "I’d be very surprised if support services and legal services don’t move."
Diamond, who now chairs African bank investor Atlas Mara, said he expects New York will benefit at London’s expense. Britain’s decision to leave the EU has global banks establishing new bases within the trading bloc to ensure continued access to clients in the region. Some observers have said that given fragmentation between European trading centres, certain activities are more likely to gravitate to the bigger bulk of the US financial capital.
Diamond’s comments contrast with a more upbeat take on Brexit from one of his successors as CEO of Barclays. Jes Staley, an American who has run the bank since the end of 2015, has been adamant that London will remain a financial hub, and has championed the city’s fintech scene as a source of jobs that will offset those leaving town. Still, he has picked Dublin for Barclays’s post-Brexit expanded EU base.
Britain is due to leave the bloc in March 2019. Brexit talks have plodded forward over the summer, with the EU’s lead negotiator highlighting the depth of the division between the two sides this week. Goldman Sachs Group said on Thursday that it could increase its Frankfurt staffing as much as four-fold after Brexit, while Morgan Stanley, Citigroup and UBS Group are also all relocating jobs to Germany’s financial capital.
As for Atlas Mara, which trades in London, Diamond said his firm will benefit as global banks lower their exposure to emerging markets because of capital controls and regulation. Atlas Mara’s opportunities to boost market share have never been better, he said, and it plans to have a presence in 10 or more African countries in the next three to five years, up from the current seven. It also has a treasury and markets unit based in Dubai.
Earlier, Atlas Mara reported that first-half net income to June rose to a record $11.5m from $1.2m a year earlier. Its share price has rebounded 36% in 2017 after sliding 82% between its initial public offering in 2013 and the end of last year, as commodity prices and local currencies slumped. Its biggest investment is a stake in Union Bank of Nigeria (UBN).
"We’ve delivered what we promised," Diamond said, adding that Atlas Mara is on track to more than double 2016’s full-year profit, which was $8.4m.
With cost-cutting and a head count reduction, Atlas Mara says it will save about $20m this year. Next year, it wants to take a controlling stake in UBN and have the bank expand by potentially buying another Nigerian lender.
"A core part of growing the balance sheet are the opportunities for UBN to make acquisitions," Kenroy Dowers, Atlas Mara’s group MD for strategy and investments, said on the same call. "We’re not indicating there’s a specific target in mind. But we do believe Nigeria is key to our strategy and we clearly want to increase our position there."
Atlas Mara’s treasury and markets business in the United Arab Emirates is another focus area with the group expecting the Dubai Financial Services Authority to authorise its operations before year end. Total revenue from this unit amounted to $27.5m in the first half, which equates to 23% of the group’s total income.
The markets and treasury operations are a mix of bond business, including sovereign bonds, and currency services such as hedging, Diamond said. There’s no proprietary trading and with other banks retreating from emerging markets, there’s "lots more to go" for this business, he said.
Having completed the sale of a 42% stake in Atlas Mara to Fairfax Africa last month, Diamond now has the capital to pursue his African and Middle Eastern ambitions. The board of Atlas Mara will change as Fairfax Africa assigns four directors and further announcements on that will be made by October, Diamond said. With cash in the bank and new partners on board, "we’ll aspire to be as fabulous as we can be".