Boston Bank A Star Player In Britain
LONDON -- U.S. banks have retreated from Europe in droves, but Bank of Boston Corp., its New England franchise under strain, is seeing greener pastures on this side of the Atlantic.
According to a recent survey, Bank of Boston is Britain's hottest banking firm, outperforming its American and European rivals big and small on key criteria such as asset growth and profitability.
Bank of Boston Ltd., operating as an investment banking firm, has outgunned no fewer than 250 local and foreign banks of all sizes to come out first in the industry performance ranking by Searchline Publishing, an analytical service.
Performance Draws Praise
John Hemming-Clark, a partner at the firm, says Bank of Boston's performance, including beefing up assets by 80% last year, was "phenomenal."
Although the analyst says inclusion of total asset size throws a bias towards big banks, Bank of Boston Ltd., only the 200th largest U.K. bank in assets, effortlessly moved past the giants of the industry -- providing a morale-booster for the "small is beautiful" school of banking.
Barclays Bank PLC, Britain's biggest bank, could only rank in 121st place on the same criteria. Bank of Boston's nearest U.S. rival was Bankers Trust International, a unit of the money-center bank, which was No. 42.
The Bank of Boston Ltd. expanded assets last year to the equivalent of $53.3 million, from 1989's $29.5 million. At the same time, pretax earnings soared to $8.22 million, from $6.3 million.
These produced a return of assets of 15% and return on capital of 54.5%.
A Lean Operation
The unit, which operates separately from the bank's branch in London, specializes in acquisition finance and development capital, primarily mezzanine and equity financing for medium-size corporate customers. It's a lean operation, employing only a dozen staff, but has notched up a total of about 75 transactions since starting up some 10 years ago.
The London branch itself employs about $1 billion of assets, out of the worldwide total for the group of $32 billion.
Much of the investment banking unit's startling earnings performance last year was attributed to what its managerss privately call "tremendous capital gains" on transactions completed in earlier years.
"We cashed in some equity kickers which helped inflate size of gains in relation to size of assets," one the unit's banker said, indicating that the book has continued to grow this year as the bank successfully grows in its chosen niche.