One of the last vestiges of Lehman Brothers that still exists at Barclays’ Americas unit could be sold, the FOX Business Network has learned.
Barclays’ Americas wealth management business—the brokerage unit of the old Lehman Brothers—is on the selling block, brokers at the firm are being told by their managers. The move comes amid a wave of defections from the division of the London-based bank to other brokerage houses, and as Barclays, like other big foreign owned banks, comes under tremendous pressure to downsize amid tougher new regulatory standards.
A spokeswoman for Barclays’ Americas wouldn’t deny the possible move.
“We are always evaluating strategic options for our businesses. If any firm decisions are made, we will provide an update in the second quarter,” the spokeswoman said in a statement to FBN.
It’s unclear how close the firm is to selling the U.S. brokerage unit, which is separate from Barclay’s larger wealth management division that operates globally and doesn’t appear to be for sale. It’s also unclear exactly how much money an outside firm might be willing to pay to acquire the unit.
But brokers at Barclays say they have been told by their managers not to take bonus offers to jump ship to another firm because a sale could come soon. Managers have told these brokers that a “sale could be in the works,” according to one person with direct knowledge of the matter, and if such a sale takes place, brokers would likely receive so-called retention bonuses to stay at the new firm.
Barclays purchased Lehman Brothers’ North American operations for a mere $1.75 billion in September 2008 just after Lehman’s financial-crisis related bankruptcy filing. With the move, Barclays planned to expand not just on Lehman’s investment-banking franchise in the U.S. as the markets recovered from the devastation of the financial crisis, but also the old Lehman brokerage franchise, which dealt primarily with wealthy investors.
While the markets did in fact recover from the dark days of the 2008 financial collapse, the Barclays Americas brokerage business never seemed to gain traction; the unit was plagued by management turmoil and more recently defections of top brokerage teams to other firms.
According to the most recent 2014 Barron’s survey, Barclays Americas’ brokerage unit is ranked 20 out of 40 firms based on its $47.1 billion in assets under management, after ranking 18 in 2013. The firm is said to have 250 brokers in 12 U.S. branch offices. At its height, Lehman employed as many as 1,000 brokers in the U.S.
In some ways the move to unload the brokerage unit is part of a larger story of Barclays’ ill-fated attempt to establish a major U.S. investment bank after the Lehman purchase. Since 2008, the bank has been plagued by regulatory mishaps and weak earnings. In 2012, its CEO Robert Diamond resigned after the firm had been accused of manipulating global interest rates. The new CEO Antony Jenkins instituted a bank-wide cost cutting program that led to thousands of layoffs.
Putting more pressure on the big bank to cut costs: New Federal Reserve rules that make it more onerous to maintain U.S. subsidiaries with assets above $50 billion. As a result, major foreign banks with large U.S. subsidiaries are unloading assets to avoid regulatory costs.