Raising the bar for global finance, Barclays owns one of Europe's largest banks, a top market-making investment bank, the top UK credit card, and an international wealth management firm. Its flagship Barclays Bank has some 1,700 branches in the UK as well as operations throughout Europe, Africa, the Middle East, and the US. Its Barclaycard arm has more than 20 million credit cards and provides consumer lending and payment processing services, primarily in Europe. Barclays Capital is one of the largest investment banks in the world (thanks largely to its acquisition of the North American operations of Lehman Brothers). Altogether, Barclays serves more than 48 million customers in more than 50 countries.
Barclays' largest segment is the investment banking business Barclays Capital, which represents nearly 40% of the group's income. Its second-largest segment, UK Retail and Business Banking, provides consumer and commercial banking, Woolwich-branded mortgages, insurance, and money transmission services. Other segments include Barclaycard, Europe Retail and Business Banking (active in France, Spain, Italy, and Portugal), Africa Retail and Business Banking (including South African bank Absa). In addition to Barclays Capital, the corporate and investment banking operations include Barclays Corporate, Barclays Wealth, and Investment Management (which oversees Barclays' 20% stake in BlackRock). There has been speculation that Barclays may regroup in a major way (á la Citigroup or RBS) in order to split off its riskier assets.
To weather the global economic crisis, Barclays has already sold some businesses, cut costs through branch closures and workforce reductions, and restructured its credit market exposures. The company sold its African custody and securities business to Standard Chartered in 2010, and Barclays Capital wound down its Barclays Venture arm. The investment bank also sold Barclays Private Equity, now Equistone Partners, to that unit's management in an effort to raise more capital. Additionally, Barclays has categorized its holding in BlackRock as available-for-sale, after writing down the value of the stake in mid-2011.
To offset some of its exposure to the UK economy, Barclays has been expanding its international business, mostly in the US and in emerging markets. In 2011, the group sold its Russian retail business to focus on investment banking in that market. (Barclays found it difficult to compete in Russia, where the majority of assets are held by state-owned banks.)
To boost its retail and commercial banking operations, the company has sought opportunistic acquisitions as other financial groups sell off noncore units at discounted rates. In one such deal, it bought Standard Life Bank from Scottish insurer Standard Life, which exited the banking business, for £226 million ($368.5 million) in 2010. The price was a significant discount from Standard Life Bank's net asset value. Barclays has been in talks to buy other businesses in similar transactions.
Barclays has also expanded its Barclaycard operations. Its 2008 acquisition of the money-losing Goldfish credit card operations from Discover Financial Services added some 1.7 million accounts, and the follow-up purchases of Citibank's Portuguese and Italian credit card units added another 600,000 accounts. In 2011, the company acquired the approximately 1.2 million UK card accounts held by Egg Banking at a discount. Continuing to build the card business, the company bought some 60,000 MBNA Europe Bank UK small business accounts from Bank of America. Barclays has also been an innovator with its money transfer operations, introducing contactless cards and mobile phone person-to-person transfers.
With the help of the corporate shuffling, the company's revenues grew by some 6% in 2011. Among the star performers that year were the UK Retail and Business Banking, Barclaycard, Africa Retail and Business Banking, and Barclays Wealth segments, which all saw double-digit growth in profits. Also in 2011, Barclay's European retail banking business returned to profitability after losing money the previous year. The tough economic climate, though, especially related to concerns over European sovereign debt, brought down earnings in the investment bank's operations (which in turn proved a drag on overall performance). However, Barclays believes it is on strong footing in terms of capital, funding, and liquidity.
More troubles hit Barclays in mid-2012, though, as the company admitted to manipulating the London Interbank Offered Rate (LIBOR), a benchmark for daily global short-term interest rates. The bank repeatedly manipulated the LIBOR in order to make its funding position look stronger than it actually was; the rigging also helped the bank make money on credit derivatives. Chairman Martin Agius and CEO Bob Diamond both resigned as a result of the developments, and the company paid US and UK regulators some £290 million ($453 million) in settlement fines. Shortly after the LIBOR scandal, the UK's Serious Fraud Office launched an inquiry into payments Barclays made to sovereign investor Qatar Holding in 2008. That same year, investment fund Qatar Investment Authority became the bank's largest shareholder with a 5% stake. Investigations for both the bid-rigging and bribery allegations continue. – less