Will UK Float Frenzy Keep Barclays PLC Top Of The IPO Pops?

We tend to only hear bad headlines about UK banks these days. Massive provisions for the dodgy peddling of payment protection insurance, manipulating LIBOR, egregious bonuses — these remain the staples of stories about the banking sector.

Yet in reality, life goes on and so does banking.

And while bankers have gotten a bad rep in recent years (well deserved in many cases), the fact is businesses large and small rely on banks to keep the gears of capitalism turning.

This inevitable demand for its services has been great for Barclays (LSE: BARC) (NYSE: BCS.US) as it’s tried to get past the damage inflicted by the great financial crisis.

Keeping capitalism ticking over

You see, while (again!) you probably wouldn’t know it from the headlines, our captains of industry have perked up considerably in the last 18 months.

Besides the improving economy in the US and UK, they’ve been cheered up as investors have regained their appetite for riskier assets like shares, which led to the surge in stock market indices around the world last year.

All these factors combined — a better outlook, greater optimism and a hungrier appetite for appetite — have spurred a slew of companies to seek a listing on stock markets.

Such initial public offerings (also known as IPOs, or flotations in the UK) are generally best attempted when equity investing is in favour, as this makes it more likely that the sellers of companies will get a fair price (or even a too-high one) for their assets. It also reduces the risk of the banks involved in making the float happen being lumbered with unwanted shares.

The IPO trend has been particularly evident in the US. Entrepreneurs fell over themselves in 2013 to take their companies public, having in some cases held off for years before as a result of the febrile markets.

We saw activity increase in the UK, too, most notably with high-profile IPOs for Royal Mail and Merlin Entertainments.

Britain still number one at something

A steady flow of IPOs are vital for investors, since it means more choice in companies we can invest in — although we’re often best off waiting for any initial float euphoria to die down.

IPOs also offset the “de-equitisation” trend we’ve seen, where companies have shrunk the number of shares available for investment by repurchasing their own shares.

The fashion for IPOs has been especially good news if you’re a Barclays shareholder. Britain’s much-maligned bank is topping the tables for US flotations so far in 2014, having also enjoyed a number one ranking in 2013, according to data from industry mavens Dealogic.

To keep hold of its top ranking, it’s had to fend off famous US investment banks like JP Morgan and Goldman Sachs (placed second and sixth, respectively) as well as fellow European banks UBS and Deutsche Bank (they came seventh and ninth).

Interestingly, third place is currently occupied by a Canadian bank — RBC Capital Markets. America’s financial sector really does seem to be open to competition from all-comers.

UK could float Barclays’ boat, too

So far in 2014, Barclays has done $619 million worth of US flotation business across seven deals, for an 11% market share.

Some may be surprised by Barclays’ big share of the US flotation market, but we must remember how the British bank swooped for lucrative elements of the collapsed US firm Lehman Brothers during the financial maelstrom of 2008.

Called a coup at the time, the depth and severity of the banking crisis that followed has rather taken the shine off this mega-deal. But at the least we can see Barclays seems to have acquired some strong talent and relationships as a result of that bold move, given its enduring presence in the US capital markets.

And the good news is there are more flotations to come in the UK, too, which should help Barclays’ London-based bankers keep in the running with their New York compatriots.

Companies ranging from the £3bn Russian retailer Lenta and the online takeaway purveyor Just Eat to UK high-street stores like Pets at Home, Poundland, House of Fraser, DFS and Fat Face are all expected to seek a listing in London this year.

That should give Barclays’ rainmakers in Canary Wharf plenty of business to pitch for!

The strength of Barclays' IPO business is another reminder that banks are not all equal, and they certainly don’t all do the same thing. It’s therefore vital to learn how to research bank shares to understand where you might make the greatest profits, or equally be taking too much risk.

Download our free report to discover how to dig into bank shares today!

> Owain does not own shares in Barclays.