Barclays eyes large US bank deal

Barclays is looking at buying a large US retail bank as it tries to rebalance its business away from a booming investment banking franchise.

According to people briefed on the plan, Antony Jenkins, the new head of Barclays’ retail banking activities, is preparing a strategy paper that will go to the board in the next two to three months.

“Nothing is imminent but we’re opportunistic,” said one person close to the bank. “If we do something, we will do it big.”

Barclays has not identified firm targets for a US retail bid or begun any talks, according to people close to the bank. But bankers and analysts point to the likes of SunTrust, PNC Financial and US Bancorp – all bailed-out US banks – as potential targets.

UK banks have suffered setbacks in the past from investments in US retail financial services. HSBC’s Household operation left it nursing billions of dollars of subprime loan losses.

However, Barclays will point to the success of its most recent US deal – when it bought the American assets of the defunct Lehman Brothers – as proof that it can digest large acquisitions.

Mr Jenkins, formerly head of Barclaycard, has worked at Citigroup in the US and knows the market. He does not share the negative views about the US of Frits Seegers, his predecessor.

But investors expressed some scepticism at the prospect of Barclays making another large US acquisition. The shares rose 0.6 per cent to 346p, having initially fallen.

“It does not make a lot of sense,” Jane Coffey at Royal London Asset Management, which invests in Barclays shares, told Bloomberg news. “Very few European banks have made a success of buying US retail banks and almost all have lost their shirts doing it.”

Barclays may struggle to raise equity for an acquisition, according to Richard Champion at Principal Investment Management which also owns shares in the UK bank.

“Barclays would require more equity in a difficult regulatory scene,” Mr Champion told the news agency. It “might be premature” for Antony Jenkins, the new head of retail banking, to make acquisitions, he said.

Barclays last month reported pre-tax profits for 2009 of £11.6bn, up 90 per cent, boosted by the Lehman deal. But looming regulations that will demand far higher levels of capital to support investment banking activity have hardened the resolve of John Varley, Barclays’ chief executive, to boost the group’s other activities.

Mr Varley announced recently that he would invest £350m to expand Barclays Wealth.