03/04/18

Top Barclays analyst leaves due to Mifid II

(Financial News) -- European head of utilities research Mark Lewis says new regulations have 'taken the enjoyment' out of bank research

The European head of utilities research at Barclays has left the bank to join a climate change think tank, after concluding that regulatory changes ushered in at the start of the year have "taken the enjoyment" out of working for a big bank.

Mark Lewis, who has been at Barclays since October 2015, starts as head of research at the Carbon Tracker Initiative on Tuesday.

He will work on raising the organisation's profile among fund managers, whose dramatic reduction in use of investment bank research presents what he calls a "great opportunity" for independent providers.

The EU regulations, known as the revised Markets in Financial Instruments Directive, came into force in January this year. They prevent investment banks providing free research to fund managers in order to encourage them to trade with them.

Lewis pointed to estimates that fund managers might cut back on research by two-thirds. He said: "You have 20-25 investment banks and other brokerages publishing research on the European utilities sector, day in, day out. It's a huge volume and it's probably not even being read.

"Since Mifid [II] came in there's no way fund mangers are going to pay for 20-25 broadly similar research offerings. Most are cutting down to six or seven, or even four or five.

"I am hoping that with my experience in the City and investor contacts, there is now a real opportunity to take our message into parts of the investor world where it hasn't been heard previously because it was drowned out by the information overload from other research providers."

The Carbon Tracker Initiative was set up in 2007, is funded by a number of charitable foundations and provides its research for free.

In an influential report, it pointed out that around 80% of energy companies' existing fossil fuel reserves cannot be used if climate change is to be kept below governments' 2-degree target, suggesting they may be significantly overvalued. More recently, it published analysis on which oil and gas firms are most exposed to this risk, concluding that the Saudi oil giant Aramco is one of the sector's least risky bets.

Lewis, who is also a board member of Mark Carney and Mike Bloomberg's Task Force on Climate-Related Disclosures, has been closely involved with the energy and climate sectors for many years.

As a utilities analyst at Deutsche Bank between 2005 and 2013, he said he had a ringside seat for what he described as German utility firms' failure to grapple with the country's transition to renewable energy, contributing to an 85% fall in their share prices over the past decade.

Lewis said that over the course of a 20-year career, working in equity research had become steadily less fulfilling. He said: "I would say that in the last three years, only about 25% of my time was spent on research. The rest is calling clients, emailing clients, travelling to see clients, and logging every single interaction because otherwise you don't get paid.

"The administrative burden on analysts has increased massively in the past 10 years. I'm not saying this has not been necessary — you can argue it was probably inevitable — but it all means there is less job satisfaction to be had."