After buying Lehman Brothers Holdings Inc.'s North American operations at the peak of the financial crisis, British bank Barclays PLC is on the prowl for another major acquisition in the U.S., according to people close to the matter.
Barclays is hunting for a retail bank that would give it more deposits and extend the presence of Barclays Capital in the U.S., these people said. In response to potential changes in banking regulation, it has designated an internal team to assess possible targets, they said. It is not in talks with any U.S. company, however, and no deal is imminent, they said.
The bank is also considering more retail acquisitions in Western Europe, they said, which would add to recent purchases such as Citigroup Inc.'s credit card portfolios in Portugal and Italy.
The move by Barclays to find more deposits underscores how the banking regulatory debate is driving strategic choices. Global and national rules are likely to toughen capital requirements and place a premium on deposits to strengthen banks' liquidity.
The Obama administration this year proposed a levy on banks based on their holdings of liabilities other than deposits. The aim of the proposal, whose fate in Washington is uncertain, is to discourage banks from relying on wholesale funding, such as bonds, as a primary source of liquidity. Instead, banks would have an incentive to stock up on plain-vanilla deposits, which tend to be more stable sources of funding and would not be taxed under the proposal.
Meanwhile, rules being worked out by international regulators as part of the so-called Basel III framework would require banks to reduce their reliance on short-term funding as a percentage of their assets. For example, a Credit Suisse report said Tuesday that Barclays' growth prospects could be limited if it does not acquire more deposits. Other U.K. banks, the report said, will probably have to shed assets in order to comply with the new rules.
Barclays says it sees a window of opportunity to expand its business after weathering the financial crisis better than many of its rivals. It is particularly interested in expanding in the U.S. and this week is playing host to a ground-breaking ceremony for Barclays Center, a basketball arena in Brooklyn, N.Y.
Barclays officials believe future growth in their loan and securities portfolios must be funded by corresponding growth in the retail deposit base, said a person familiar with the matter. The bank has also said it is interested in expanding its private wealth business.
President Robert E. Diamond Jr. is leading an assessment of possible wealth management deal targets, and Barclays Chief Executive John Varley is sizing up potential retail and commercial opportunities, according to another person familiar with the matter.
Increased interest in the U.S. is a shift in the bank's retail strategy since the departure of Frederick "Frits" Seegers in November; he left in an organizational shake-up that moved the corporate bank under the control of Diamond, who oversees the investment banking and management divisions. The bank then created a division, global retail banking, headed by former Barclaycard Chief Executive Antony Jenkins.
Jenkins, known for his prudent management of lending risk when he headed the card business, has been charged with creating "critical mass" in markets where Barclays has a significant presence, Varley said during the bank's annual results presentation in February.