The comeback is well and truly on.
In an interview with Bloomberg's Stephanie Ruhle and Erik Schatzker live from the Milken Institute Conference in Los Angeles, California, Former Barclay's CEO and CEO/Founder, Atlas Merchant Capital said, he sees investment banking as robust for decades.
"Investment banking will be a robust business for decades… there is going to be a continued period of time where the big bands are limited in their risk taking and ability to do deals."
Diamond on why he decided to stay in banking following his exit from Barclay's:
"Good questions. So I had no interest in retiring. I think financial services is an area with even more opportunity, if that’s possible, today than probably before the crisis. The impacts – one of the impacts of the crisis is there are going to be a lot more entrepreneurial business models. And I think developing business models and looking at what will be effective is fun. If you look at the major indexes, the equity indexes, people talk about this, they’re up 30 percent since the crisis. But if you take financials out, they’re actually up 60 or 65 percent. Financials are still down quite a bit. And Africa, as you know, was a big – an important business at Barclays. So I had experience there since the Absa acquisition in 2005, and it was kind of a natural place to look."
On how to get investors comfortable in Africa:
"You’re right. Governor Sanusi is I think probably one of the best central bank governors in the world, not just in Africa, and was doing very, very positive things. But Sub-Saharan Africa isn’t one integrated country. It’s 46 different countries and each will be different. And some are in better shape for investment than others, but we do think Nigeria is a big and important opportunity. I think what our business model has differentiated than many other investors in Africa starts with our decision to raise permanent equity and list on the London Stock Exchange. For the heads of state in Africa, for the companies that we’re looking to acquire, that’s a big positive. It’s permanent equity. It’s not going to come out when the LPs want it to come out. But I think the second part of the business model that differentiates us is that we don’t think of ourselves as just investors. We really think of ourselves as operators. So we’re taking majority positions and we’re working very closely with the management teams to actually impact the business models. And as you know, the business models in Africa in many of the banks, not all of them, are rather simplistic. It’s about taking a deposit and investing in Nigerian T bills and getting big returns."
On people feeling uncomfortable making investments in Nigeria due to alleged corruption:
"Well one of the things that we found with the equity and with the listing is that the investors who invested in our IPO were predominantly from the US, which was surprising based on other fundraisings that have gone on recently. But even more surprising in a pleasing way is the vast majority of them, this is their first investment in Africa. And so I think they liked the permanent equity, the listing on the London Stock Exchange, and the fact that we had a number of people who have operated in Africa. So they had confidence in the team… Arnold Ekpe, who’s chairing the operation, was the former CEO of Eco Bank. So we look at this as an opportunity to impact the operating environment. And I think that gave some comfort. But Stephanie, I would also say as you look at opportunities to invest, there’s corruption in certain areas in Africa but not just Africa. So this is something that has to be a part of due diligence in investing and operating in many countries around the world."
On how to price the threat of corruption:
"Well it’s an excellent question. So if you look at our first acquisition that we announced, Bank ABC, it’s in five countries, which gives it great diversification. It’s SADC region, which if you looked at that as a country it’d be one of the top 20 GNPs in the world. It has 20 percent current earnings. It trades just above book value. It has a management team that’s been together for two decades. I think that’s priced appropriately. So there’s no one way to look at any of that. But when you look at the current earnings, the price to book, the management team, the respect the management team has from the regulators who – of course we visited with – with all of the regulators and the central bank regulators in those countries."
On whether there are no great opportunities left at big banks:
"No. I think there’s going to be a period – we talked about this when I did an op-ed I think it was in September, at the end of the summer or in September. I do think that the – in the US, in the UK and in Europe and the bigger developed economies, there is not yet the feeling that too big to fail has been eradicated or too big to manage has been eradicated. And I think there’s going to continue to be a period of time when the big banks are limited in risk taking and in the ability to do deals."
On whether talent wants to be inside large investment banks:
"I think it’s a combination to be – to be fair. I think if you look at the facts, there’s probably not as many jobs, not as many opportunities anymore. And there will be – you cannot look at the financial services industry today and not recognize that the big, more complex banks are safer, are sounder, have made very, very positive changes. But on the other hand, regulation is causing some of the banks to exit businesses like commodities trading. So it is a different business today. And I think if – if you’re looking for a job in financial services, you have to balance both of those."
On whether a British bank can compete with U.S. banks:
"I think time will tell because that’s a question a lot of people are asking. I think the answer is yes. I think Barclays’ footprint in investment banking, the footprint that they built in asset management and BGI is a top-tier footprint. And the management will find a way to continue to invest in that business…I think if you look at the very, very top investment banks in the world, they all have challenges. And the most successful ones are going to be successful for decades and decades and decades, but they’re still – they’re still working through the challenges of much lower volumes in the fixed businesses, for example. So we’re going to see these challenges over the next couple of years. But I guarantee you investment banking as an industry will be a robust business for businesses."
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Source: Bloomberg Television