Barclays (UK)

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Barclays is now the UK's leading banking brand, having narrowly avoided the worst problems of the 2008 financial crisis. Following a difficult decade in the 1990s, during which it cut loose most of its global profile, Barclays set about re-establishing an international presence in the 2000s with purchases in Spain and South Africa. In 2007, it agreed outline terms for a merger with Dutch banking giant ABN Amro, before being beaten to that prize in a bidding war against a consortium led by Royal Bank of Scotland. That was to prove a lucky escape, as the purchase of ABN Amro subsequently came close to destroying its buyers. Saved from that fate, Barclays had no need for government aid in the global financial crisis which followed. Instead, it took advantage of the turmoil within the industry to snap up the substantial investment banking division of failed Wall Street giant Lehman Brothers for a bargain price. Despite its greater financial strength it has felt the impact of public and regulatory dissatisfaction with banks in general, receiving several large fines for fiscal misbehaviour as well as widespread negative media coverage, especially in the UK.

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Brands

Woolwich Barclays Wealth
Barclays Business Banking Barclaycard
Personal Banking Absa South Africa

Recent stories from Adbrands Weekly Update:

Adbrands Weekly Update 22nd Jun 2017: British bank Barclays and four former executives including ex-CEO John Varley have been charged with fraud by British regulators in connection with a deal agreed in 2008 with the Government of Qatar. That year Barclays raised almost £12bn in emergency funding from investors, including around £5bn from Qatar, to avoid a bailout from the UK government. A statement from the Serious Fraud Office said the charges of conspiracy to defraud and of false representation relate to "a $3 billion loan facility made available to the State of Qatar" at the same time as the cash call. Private equity fund PCP, which also took part in Barclays cash call on behalf of another Gulf State, has already accused Barclays of artificially boosting its share price by lending Qatar the money to invest back into the bank to buy stock. Barclays denies those allegations.

Adbrands Weekly Update 4th May 2017: There were more strong numbers from UK banks, which seem all to have finally turned the corner after years of struggle with impairments, fines and litigation. Like Lloyds last week, Barclays doubled its underlying profits for the first quarter, though the final reported figures were dented by a £658m loss on the sale of Africa subsidiary Absa. Revenues were also up strongly by 16%. Meanwhile Royal Bank of Scotland reported a much higher than expected profit after years of losses. Analysts had been anticipating a £50m net profit, but instead RBS delivered almost £260m, compared to a loss of £960m in the year ago quarter. Topline was up 14%. HSBC also made up for a string of disappointing numbers last year with a 40% jump in revenues and underlying profits that were also well above expectations.

Adbrands Weekly Update 23rd Feb 2017: There were winners and losers among British banks, all reporting this week. The clear winners are Lloyds and Barclays. With the worst of their regulatory problems and PPI provisions now in the rear mirror, and their respective commercial banking businesses reaping the rewards of the post-Trump boom, both saw dramatic improvements in performance, at least on paper. Lloyds' statutory net profits more than doubled to £2.5bn, though total income slipped back to £17.3bn. Barclays did even better, with net profit soaring to £1.6bn, compared to a £394m loss in 2015, on revenues down slightly to £21.5bn. The biggest contributor to profitability in both cases was a sharp fall in provisions for conduct and litigation charges. By contrast, the losing side was represented by HSBC and RBS. Divestments and slowing growth in Hong Kong and the UK caused HSBC's revenues to fall to $59.84bn, their lowest level since 2004. Impairments, losses on those divestments and high tax charges prompted net profit to plunge by 77% to $3.45bn. RBS results are out tomorrow and are expected to show another huge loss, marking the struggling bank's 9th consecutive year in the red. A huge provision for mis-sold US mortgage securities resulted in a deficit of as much as £7bn.

Adbrands Weekly Update 5th Jan 2017: The year ended with yet more deals and lawsuits between US regulators and European banks in connection with the mis-selling of mortgage securities in the run-up to the 2008 financial crisis. Deutsche Bank managed to negotiate down a potentially catastrophic $14bn fine to a still-damaging $7.2bn. Of this, $3.1bn will be paid in cash, and the remainder is to be reflected in loan discounts and other forms of financial assistance to US homeowners. At the same time, a separate settlement of $5.2bn was agreed with Credit Suisse, to be split along separate lines between penalty payment and consumer relief. However, no such deal has been reached with Barclays despite months of talks. As a result, the Justice Department has issued a lawsuit against the British bank and two former employees for selling more than $31bn of mortgage-back securities to investors between 2005 and 2007 despite knowing the loans involved had material defects.

Adbrands Weekly Update 3rd Mar 2016: It's proving to be yet another grim reporting season for British banks, which continue to struggle with billions of pounds in litigation costs and expenses relating to PPI claims and exchange rate fixing. Barclays confirmed growing speculation that it will abandon its remaining international operations to focus on the UK and US corporate banking. It said it will gradually divest its 62% holding in South Africa's Absa Group and other interests in Africa over the next two to three years. Most other international interests assembled during the 2000s have already been sold. Statutory results for 2015 showed a 1% lift in total income to £25.5bn, but attributable losses more than doubled to £394m. That was largely the result of another £4bn in litigation provisions over the course of the year, and a £570m loss on the sale of international subsidiaries in Europe. Barclays' total PPI costs to-date reached £7.5bn. Adjusted profits excluding provisions slipped 3% to £2.7bn.

Adbrands Weekly Update 15th Oct 2015: British bank Barclays is set to name American investment banker Jes Staley as CEO, its third in three years. Another American, Bob Diamond, was forced out in 2013 in the wake of the Libor rate-fixing scandal; so too was his UK-born successor Antony Jenkins earlier this year after clashes with other members of the senior management team. Chairman John McFarlane has been caretaking the role since July on an interim basis. Staley spent more than 30 years at JP Morgan Chase in a series of senior roles, and is widely regarded as a disciplined and pragmatic leader, less brash or confrontational than either of his two predecessors. He left in 2013 to join a hedge fund after a power struggle among the various potential successors to JPMC's CEO Jamie Dimon. Reaction to Staley's appointment was mixed, with many interpreting it as a U-turn on Barclays' previously stated aim to quit investment banking.


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Background

Free for all users | see full profile for current activities: Barclays traces its history back to the late 17th century when goldsmith Freame & Gould began lending money to royal courts and merchants to fund trade. In the days before street numbers, they operated in Lombard Street in the City of London under the sign of the Spread Eagle, which remains a key element in the Barclays logo. In 1736 John Freame's son-in-law, James Barclay, joined the business and came to play an increasingly important part in the business, managing a move into private banking on behalf of wealthy families. As other partners joined the bank, its business expanded, becoming Barclays, Bevan & Tritton in 1780. During the following century, Barclays began to acquire smaller rivals, becoming Barclays & Company in 1896. A series of small international banks, including the Colonial Bank and the National Bank of South Africa, joined the group in the early years of the 20th century, adding a network in Africa and the Middle East. In 1918 the company, now Barclays Bank Limited, amalgamated with the London, Provincial and South Western Bank to become one of the UK's 'big five' banks.

By 1950, Barclays had overtaken Midland to become Britain's biggest bank, and it was the first to use computers to manage its book-keeping. In 1966, Barclays pioneered the launch of credit cards in the UK, teaming up with BankAmericard, a predecessor to Visa, to launch the Barclaycard. (Rival card Access was introduced by Lloyds, Midland and NatWest in 1971). In 1967, the bank was the first in the world to open a 24-hour automatic cash dispenser (or ATM). A year later, Barclays attempted to engineer a merger with two other leading banks, Lloyds and Martins. Regulators blocked the Lloyds purchase, although the acquisition of Martins Bank went through.

Seeking a global profile, Barclays targeted the US market during the 1980s, acquiring American Credit and Bankers' Trust's branch network in New York. In 1986, the bank acquired two UK investment banks to form Barclays de Zoete Wedd (BZW), one of the biggest homegrown players in the newly deregulated British financial market. In 1990, the group acquired German bank Merck Fink & Co and France's L'Europeenne de Banque. But the recession put a stop to continued expansion the following year. (The German bank was sold again in 1999).

As Britain's biggest bank, Barclays had lent heavily to third world countries as well as to small UK businesses. Now these debts were rapidly turning bad, and the group was forced to write off around £2.5bn of loans in 1992. New CEO Martin Taylor began a wide range of cost-cutting measures, and started to dismantle the group's international and investment banking network. First moves were to slim down operations in Australia and the US. Then when BZW failed to dent the stranglehold of American banks on the investment market, it too was carved up, sold off in messy chunks to different buyers. The rump was restructured in 1997 as Barclays Capital.

The same year, Taylor put out feelers for a merger with rival NatWest, then struggling with its own over-expansion problems, but was rebuffed. Meanwhile tight internal cost controls led to a series of strike motions by counter staff at Barclays' UK branch network. The following year, Barclays Capital suffered the twin blows of bad debts in Russia and involvement in the collapse of hedge fund Long-Term Capital Management, which together cost the group some $250m. Taylor shocked the markets by resigning at the end of the year after his radical plans to demerge the bank's retail and corporate businesses were rejected by the board. Meanwhile, influential consumer advice service Which? awarded Barclays a wooden spoon for "the consistent mediocrity of its products". It took Barclays six months to find a fulltime replacement for Taylor. But there was a fresh blow when new appointee Michael O'Neill resigned unexpectedly on his first day in the job after apparently failing a routine health check.

Canadian banker Matthew Barrett finally took over the role towards the end of 1999. He got off to a strong start in early 2000, reporting pre-tax profits for 1999 up 30% to a record £2.5bn. Barrett also pledged to double profits by 2004 by cutting costs by £1 billion over three years. Although financial analysts welcomed these moves, customers were less happy and the bank was forced to endure several months of negative PR. Its plans to cut substantial numbers of branch outlets led to a public outcry against shrinking networks. Barclays pointed out that substantial moves towards telephone and internet banking, combined with competition from supermarkets and converted building societies, had left many branches with hugely reduced customer portfolios. Then, Barclays was involved in an embarrassing debate over charges imposed on customers using rival banks' ATM machines. Rival banks seized upon the opportunity to knock Barclays' branch closures and ATM charges in their marketing.

Barrett's next chance to shine came in mid-2000, when Barclays announced it would acquire Woolwich, the former building society, for £5.4bn ($8bn). That deal made Barclays Britain's fourth-largest mortgage lender with around 10% share and the country's biggest internet finance operation. Both brands were retained, with Woolwich's mortgages business being transferred to Barclays Mortgages. The group also sold its Dial vehicle leasing and contract arm to Dutch bank ABN Amro for £269m, and a 60% stake in its BarclaysNet ISP service to Freeserve. In late 2001 the group took a 25% stake in boutique investment start-up Bluebay Asset Management.

Barclays moved back into the international sector during 2003. In April it confirmed it was in advanced negotiations to acquire Spain's Banco Zaragozano, a few weeks after the bank's two main shareholders, Alberto Cortina and Alberto Alcocer, were each sentenced to more than three years in prison for defrauding investors in a property deal. The deal was tied up a month later with a price-tag of E1.14bn. The group was also reported to be bidding for Banco Atlantico, a small Spanish retail bank, at the end of the year, but lost the deal to a Spanish buyer. See full profile for current activities


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