Barclays Puts BankAmerica Exec O'Neill At the Helm

Barclays Group PLC of London has reached across the Atlantic for its next group chief executive.

The British banking giant said Thursday that it tapped Michael O'Neill, a longtime BankAmerica Corp. executive, to fill a post vacated by Martin Taylor in November.

Investors applauded the news, sending shares of Barclays up 5.5% on the London Stock Exchange.

Analysts in the United Kingdom said they viewed Mr. O'Neill-a 25-year banking veteran-as the right executive to clean house at Barclays, which suffered big losses in its global capital markets unit last year. His extensive merger experience and relationships with large American investors were also seen as pluses for $386 billion-asset Barclays.

"As we see continued consolidation in European banks within the same markets, the next logical step is cross-border mergers," said John-Paul Crutchley, an analyst with Credit Lyonnais Securities in London.

With the introduction of the euro, Barclays might consider combining with a British or European bank, Mr. Crutchley said. "But an American CEO might be more interested in an alliance with a North American bank," he added.

In an interview, Mr. O'Neill, who will take Barclays' reins March 26, said he is in no rush to strike a cross-border deal. The 52-year-old executive helped Continental Bank Corp. negotiate its 1994 merger with BankAmerica, and more recently he worked on the BankAmerica/NationsBank transition team.

"It is a lot easier to accomplish cost saving with an in-market merger," he said. "The big European mergers we have seen recently have been in- market, within France and Spain."

Mr. O'Neill's banking background stands in stark contrast to that of his Barclays predecessor. Mr. Taylor began his career as a business reporter and was heading a textile company when Barclays tapped him to be its chief seven years ago. He had no banking experience.

Mr. O'Neill, however, grew up professionally in banking; he joined Continental Bank in 1974, at 28. He did a stint in London in the 1980s for the Chicago bank and was its chief financial officer when BankAmerica bought it.

In the '80s "there was a long list of differences" between the U.S. and U.K. banking systems, Mr. O'Neill said. "But now they are facing many similar, though not identical, pressures, such as consolidation, disintermediation of banks, monoline companies, and supermarket banking."

Mr. O'Neill has also served as BankAmerica's CFO and was most recently president of its principal investing and wealth management business.

Barclays is the largest corporate bank in the United Kingdom, with extensive corporate relationships throughout Europe and a U.S. corporate bank focusing on cross-border transactions. It also has 12 million retail customers worldwide, the majority in Britain,.

The bank boasts the Barclay Card, Europe's premiere credit card, which some analysts consider its crown jewel. The banking group has over nine million cards issued in Britain and a chunk of the Continental credit card market.

Barclays' Achilles heel, however, has been its capital markets strategy, analysts say. Though the banking group will report annual earnings Tuesday, it stated several months ago that it has allowed for $325 million losses in Russian and emerging markets trading.

The bank has also attempted to enter the equities business, but divested that in 1997 to focus on debt capital markets. Barclays Capital has been a big booster of the fledgling European high-yield market and opportunities arising from introduction of the euro, the monetary unit adopted by 11 countries in January.

Mr. O'Neill said a capital markets unit is vital to a large wholesale banking business. "Customers require this expertise to help manage interest rate risk, foreign exchange rate risk, and cross-border deals," he said.

He added that it would be premature for him to outline his plan for Barclays. But Mr. O'Neill's workout of a difficult situation with D.E. Shaw & Co.-a New York-based hedge fund in which BankAmerica had a substantial investment-should stand him in good stead, said Raphael Soifer, a bank equity analyst with Brown Brothers Harriman in New York.

Mr. Soifer and other analysts describe Mr. O'Neill as very focused on shareholder value. He instituted risk-adjusted capital models at BankAmerica that significantly improved loan portfolio performance, Mr. Soifer said.

As a big-bank CFO, Mr. O'Neill developed excellent relationships with investors, something that U.K. analysts find appealing.

"He needs to do the bread and butter things right now, focusing on cost- control," said David Townshend, an analyst with Goldman Sachs & Co. in London.

Mr. Soifer said Barclays' board is unlikely to be interested in merging with a U.S. bank soon. "English banks have not had a good experience in the U.S. Barclays, Natwest, and Lloyds have all decided to pull back," Mr. Soifer said.

Indeed, Mr. O'Neill said he hopes to expand the bank's Continental operations, especially with the advent of the euro.

"Barclays already has a strong euro-clearing service in place, and it seems a solid plan to build on the bank's business in the rest of Europe," Mr. O'Neill said.

Barclays group chairman for the last five years, Andrew R.F. Buxton, is retiring in April. Sir Peter Middleton, the deputy chairman who has served as interim group chief executive, will assume the chairmanship.

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