Barclays PLC, which bought the credit card firm Juniper Financial Corp. in December, is in no rush to do more deals in this country, its chief executive says.
John Varley said he expects the London banking giant to expand its U.S. businesses substantially - and organically.
"Do we have to buy things in the United States to continue to drive the sort of growth that we have been driving? My answer is no, we don't," Mr. Varley said in a telephone interview Tuesday.
Barclays now has three business lines in the United State: asset management (Barclays Global Investors); investment banking (Barclays Capital); and credit cards (through its $293 million purchase of Juniper from Canadian Imperial Bank of Commerce).
Over the past year Wall Street speculation has swirled about Barclay's ideas of merging with a U.S. company. One rumor, which emerged before the Juniper deal, had the $1 trillion-asset Barclays buying Providian Financial Corp.
Barclays was also identified as a target, namely for Bank of America Corp. or Wells Fargo & Co. All those companies would not comment at the time of the chatter, and Mr. Varley declined to discuss the rumors Tuesday.
Barclays' chairman, Matthew W. Barrett, told American Banker in an October interview in New York that U.S. commercial banking companies were too expensive, though he called a merger of equals "conceptually" possible. But "there is nothing in the horizon at the moment," he said then.
Mr. Varley, who took over as CEO from Mr. Barrett in September, has upheld that stance.
"The economics of buying retail and commercial banks [in the U.S.] do not stack up relative to the value tests that we apply," he said Feb. 10 during the 2004 earnings presentation.
On Tuesday he said the chances of teaming up with a European banking company are also remote.
The executive said he believes that the relatively small Juniper, which has $1.4 billion in receivables, provides a sound U.S. base for Barclaycard, which had receivables of $43 billion at yearend.
Barclays intends to expand the cards business as aggressively as it has the capital markets and asset management units, Mr. Varley said. Barclaycard has 11 million customers in the United Kingdom and just under 3 million elsewhere, and he said he wants the same number of customers in both categories by 2013 - though he would not give specific growth targets for the United States.
The aim is for Barclays' U.S. cards business to be as successful as its asset management and investment banking business, Mr. Varley said. Profit at Barclays Global Investors, in San Francisco - which he was visiting Tuesday - surged 84% last year, to $600 million before tax, and assets under management rose 16.7%, to $1.4 trillion, he said.
According to company reports, Barclays Capital's pretax profit jumped 25% in 2004, to $1.9 billion. That unit generated two-thirds of its income outside the United Kingdom, Mr. Varley said.
"It is no coincidence that those two businesses are the businesses within Barclays that have the largest exposure to the United States," he said. "A big part of that growth has been success" here.
He said he sees no reason to assume that growth in those businesses or in the U.S. would slow this year, but did not disclose performance or growth targets.
Barclays Capital was the 10th-largest debt underwriter in the United States in 2004. Robert E. Diamond Jr., the unit's chief executive, said in an interview with American Banker last year that the goal is to be No. 5 or No. 6.
Barclays Capital ranked seventh among U.S. syndicated loan arrangers, from No. 11 in 2002, according a recent ranking by Thomson Financial.
According to Barclays' 2003 annual report, the United States accounted for 7%, or $457 million, of total profits. (The company had posted a $350 million loss here in 2002.) Assets grew 6.4% in 2003, to $88.7 billion. The 2004 report has not been released.
Mark Thomas, an analyst with Keefe, Bruyette & Woods Inc. in London, said Barclays Global Investors "has clearly been the star performer."
"It is one of these positive-momentum stories," and no further acquisition deals are needed, Mr. Thomas said.
Though Barclays cannot afford to do a large-enough acquisition to bulk up Barclays Capital or Barclaycard, it could try to develop merchant processing as an alternative to increasing card issuance, he said.
Competition in processing is just as fierce as in issuance, Mr. Thomas said. But many banks outsource processing, which could be a chance for Barclays to build a book of business.
Mr. Varley said his company does not feel pressured to expand into other consumer lending or commercial banking businesses.
"I am not interested in Barclays being an also-ran in markets [or products] where we might be tempted to compete."
Mr. Varley acknowledged that expenses are growing fast: 15% last year, to $16.1 billion. But profit grew faster: almost 20%, to $6.3 billion. Analysts have said that a good part of those earnings are a result of a lower loan-loss provision.
Though Barclays is one of the world's 10 biggest banks in assets market capitalization, it is "the only bank in the top 10 that has not been involved in transformational M&A over the last five years," Mr. Varley said. "That is no coincidence."
