Hong Kong: Barclays Plc is on track to make money from its cash-equity broking unit in the Asia-Pacific region by 2016, seven years after it started the business.

Recent cost cuts should allow the UK’s second-largest bank by assets to turn a profit in Asian cash equities by the end of next year, said Vikesh Kotecha, the firm’s Asia-Pacific head of equities trading. Kotecha said Barclays has also refocused on its most profitable clients in a business that includes electronic and portfolio trading, exchange-traded funds and research.

Kotecha said he expects the unit’s turnaround to help boost return on equity in the broader Asian equities business from the current single-digit number to a level approaching the group target of 12 per cent in 2016 set by CEO Antony Jenkins. “Our ROEs were very challenged previously because of our cash business,” Kotecha said in an interview. “It’s the business that traditionally has struggled to make money for most banks.”

London-based Barclays has been restructuring its investment bank, which includes the equities unit, in a global revamp unveiled a year ago intended to revive earnings. Tighter regulations and higher capital requirements are forcing rivals from Standard Chartered Plc to Nomura Holdings Inc. to either shut businesses or cut jobs in equities, and focus on more profitable areas.

Barclays doesn’t break out figures for its Asian cash-equity business, which is part of a broader equities group that also covers prime financing, distressed credit and equity syndication. Kotecha oversees the Asian equities group together with John Chang head of equities distribution for the region.

More than 10 per cent of revenue at Barclays’s investment bank came from the Asia-Pacific region last year. Equities was the division’s second-biggest business segment globally, accounting for 27 per cent of revenue, filings show.

The bank started its Asian cash-equities unit in 2009 as part of a global expansion following the acquisition of Lehman Brothers Holdings Inc.’s US operations after the American firm’s collapse during the global financial crisis. Barclays curtailed its plans to expand into new markets in Asia amid slumping trading volumes that also prompted Samsung Securities Co. and Mizuho Financial Group Inc. to scale back in the region in 2012.

Slowing its expansion and cutting jobs left Barclays’s Asian equities unit with 30 per cent fewer employees than the average regional operations at other global banks, according to Kotecha, who declined to give specific numbers. The bank shed about 100 jobs across its Asia-Pacific investment-banking and markets businesses in June, a person with knowledge of the matter said at the time.

“We stuck to a smaller size when the party popped,” said Chang. “But now that the dust is settling, we are selectively investing.”

In the past 12 months, Barclays hired three managing director-level bankers to lead its programme and ETF trading, electronic trading, and equities sales trading in the region.

The bank last year shifted its prime financing and distressed-credit businesses in Asia from its fixed-income division to the equities unit. The new structure allows the most profitable clients to be referred to staff within the various businesses in that unit, including to cash equities, allowing Barclays to offer them a wider range of products in the process, Kotecha said.

Hong Kong-based hedge-fund manager Caesar Luk, a Barclays client for five years, says the bank’s brokers set themselves apart from the competition by contacting him with specific investment ideas, rather than repeating consensus themes.

“They have never been shy in going out of their way to highlight money-making ideas,” said Luk, CEO of E.I. Sturdza Investments (Asia) Ltd., without elaborating. “If I have to be critical on one thing, it would be their lack of primary deal flows throughout the region.”

Barclays ranked 34th in advising on Asia-Pacific equity and equity-linked offerings last year, down from 23rd in 2013, data compiled by Bloomberg show. Managing such transactions helps cement ties with institutional fund managers seeking better share allocations from banks arranging stock sales.

Barclays’ investment bank reported an ROE of 2.7 per cent for 2014, the least of the group’s four units and down from 8.2 per cent a year earlier. “We have cut costs and taken our pain earlier than everyone else,” Kotecha said. “Our cost is already at the best place possible. It’s a question of increasing revenues, which will help us hit our global return-on-equity target.”