Content area
Full Text
Bloodied but unbowed, Barclays Bank PLC is trying to find new footing in the United States.
After losing nearly $630 million in the United States last year, the London-based bank is selling off more than $6 billion in low-margin and problem loans, and has turned management of its U.S. operations over to Barclays de Zoete Wedd, its investment banking arm.
The shift in policy brings to a close a long and unhappy chapter for Barclays. Analysts, bankers, and former Barclays executives say the British bank's foray into the United States offers a case study in how not to move into a foreign market.
"It's been an unmitigated disaster and a source of significant losses," remarks Phil Pickard, a sales specialist at James Capel in London.
"Like many other foreign banks, they came here with the wrong assumptions," said one former Barclays employee who declined to be identified. "They assumed there was no risk in lending to the Fortune 500, that they knew more about banking than any American, and they could get the same spread on their money here as in their home country."
Barclays first opened a U.S. agency in 1890. But the real saga began in the 1970s when the bank started to ambitiously expand its U.S. retail and corporate market operations under the assumption that bigger was better.
Barclays was not the only foreign bank to fall prey to this faulty strategy. Many others, including some of the world's biggest banks, were similarly expanding in the United States, attracted by possibilities for business in the world's largest financial market.
But sources say Barclays had no real long-term strategy and failed to adequately monitor the credits it was making. Meanwhile, they add, management was handed over to a clubby group of executives from London and other far-flung outposts who were promoted because of their seniority but were completely unfamiliar with the United States.
"They had this huge lending limit and thought they could throw all kinds of money at people and somehow it would come back to them," says the same former Barclays banker.
For example, according to estimates by Salomon Brothers that have been confirmed by the bank, Barclays extended between $3 billion and $4 billion in real estate lending in...