Gripped by a recession at home, British banks with big U.S. operations are on the hunt for acquisitions here.
An improving U.S. economy and fat profits at U.S. banks give the British banks additional encouragement to build on their market positions in this country.
John Tugwell said that in 1991, when he became chairman of National Westminster Bancorp, the U.S. banking unit of National Westminster PLC, a lot of U.S. bankers told him that trying to salvage the bank "was a lost cause." He said they offered to take it over a low price.
|A Big Commitment'
These days it looks more likely that Natwest will do the buying.
"We've got quite a big commitment to North America, and we don't intend to stand idly by and let others knock us out from our position," Mr. Tugwell said. "We would like to develop into a meaningful regional bank."
Natwest Bancorp, with $22 billion assets, owns banks in New York and New Jersey.
"What's driving revenues is market share," said James H. Cleave, president and chief executive officer of Marine Midland Banks Inc., a $17 billion-asset unit of the London-based HSBC Group. "We are looking around New York State for more acquisitions, and we intend to be in on the fray."
This aggressive attitude marks a dramatic change from the low profile that British banks have adopted over the last few years, as they sorted out billions of dollars in bad loans, much of it related to real estate, in the United States and at home.
Several, in fact, threw in the towel, at least in terms of consumer banking.
Most recently, Barclays Bank PLC sold 62 New York branches to Bank of new York Co. It continues to offer corporate finance activities here, but has pretty much dropped out of retail banking.
In 1986, Midland Bank PLC sold Crocker National Corp. to Wells Fargo & Co.
That same year, Lloyd's Bank PLC sold its California retail bank to Japan's Sanwa Bank after deciding it could make more money at home
Two years later, Standard Chartered PLC, needing capital, sold its Union Bank of California unit to Bank of Tokyo Ltd.
But Natwest and Marine Midland has well-capitalized parents that decided to tough it out, even if it meant pumping in hundreds of millions of dollars to cover large loan losses over the last few years.
Their tenacity has paid off.
Marine earned $34 million in the first quarter, 13 times the depressed level of the same period in 1991. This followed $109.2 million in net income in 1992 and a $1.89 million loss the year before.
Natwest's first-quarter earnings totaled $60.7 million, about double the 1991 level. It earned $155.7 million last year after a $371.5 million loss the year before.
And, as profits improve, the banks are eyeing new markets.
Natwest has acquired branches in New York's Westchester County from East River Savings Bank, opened additional branches in Manhattan, Brooklyn, and Long Island, and is looking to expand its 140-branch New Jersey franchise.
Marine Midland, once an aggressive acquirer, is again scouting for acquisition in New York State. It may also consider expansion into neighboring states.
"We gather more deposits in New York State than we can deploy in New York," Mr. Cleave said. "Does our group wish to be in the banking business in other parts of America? The answer is decidedly yes."
another U.K.-owned bank looking t expand its U.S. activities in Citizens Financial Group Inc, a unit of Royal Bank of Scotland.
As part of a drive to double its assets to $10 billion, Citizens Financial has acquired two U.S. banks - the $1.7 billion-assets Boston Five Bancorp and the $740 million-asset New England Savings Bank - in recent months.
The Case for Caution
Matthew Czepliewicz, a bank stock analyst with First Boston Corp. in London, said he thinks the British-owned banks can succeed in the United States, but he expressed concern about toughening competition and the possibility of a flatter yield curve.
"But so long as the banks expand at a modest pace, opportunistically buying a branch here, a network there, and don't bite off more than they can chew, I see no reason why they couldn't succeed," he said.
But Nick Collier, a London-based banking analyst with Morgan Stanley & Co., said he doubts that major expansion is the United States is in the cards for either Natwest or Marine Midland.
"The prime objective for Natwest and Marine is to move back into profitability and consolidate that profitability," he said.