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Barclays Launches U.S. Online Savings Bank w/Rates Similar to Ally
Quote :BUSINESS Updated May 6, 2012, 2:56 p.m. ET
Barclays to Launch U.S. Online Savings Bank
By MAX COLCHESTER And DAVID ENRICH
LONDON—Barclays PLC is launching an online savings bank in the U.S., the British lender's first foray into gathering deposits in the vast U.S. market.
Barclays executives say their move into the U.S. is designed to improve the bank's ability to finance its American credit-card business without relying entirely on volatile wholesale markets.
"We want to grow our credit-card business over time in the U.S., so we want to make sure we can fund the growth," said Antony Jenkins, the chief executive of Barclays's retail and business banking operations. "In this day and age, it's always good to have diversity of funding."
Barclays's goal is to lure depositors by offering interest rates on deposits of about 1%. That will place Barclays among a small handful of other lenders, such as Ally Bank, that are dangling interest rates on deposits in that range, according to bankrate.com.
Barclays recently launched a similar online savings bank in Germany, and raked in about €1 billion ($1.3 billion) of deposits in two months. Mr. Jenkins said the goal is to attract a similar amount of deposits in the U.S.
The initiative comes as regulators in the U.S. and other countries increasingly demand that banks like Barclays finance their local retail operations using locally raised funds. Until now, Barclays has financed its U.S. credit-card business primarily by borrowing from the capital markets. But regulators are pushing banks to turn to more-stable funding sources, such as retail deposits.
The online savings bank will be Barclays's latest endeavor in the U.S. Last year, the Americas was Barclays's second-largest market outside the U.K. by revenue.
In 2008, Barclays bought the North American operations of Lehman Brothers out of bankruptcy protection, catapulting the British bank into the top tier of global investment banks. Barclays's credit-card business, known as Barclaycard, has about five million U.S. customers and $12 billion in outstanding bills.
Barclays also is looking to beef up its managerial presence in the U.S. Last month, it relocated Thomas Kalaris, the head of its wealth-management arm, to New York from London to help expand the bank's portfolio of businesses there.
Barclays executives in the past have studied the possibility of buying a U.S. retail bank, people familiar with the matter have said. This week's launch of the online savings bank should put an end to such speculation, Mr. Jenkins said.
"We have no intention of buying a retail bank in the U.S.," he said. "I don't feel the need at all to build a big brick-and-mortar business in the United States."
Quote :May 6, 2012 9:08 pm
Barclays offers US online savings account
By Sharlene Goff, Retail Banking Correspondent
Barclays is moving into the US retail banking market for the first time in decades, with the launch of an online savings account designed to secure cheaper and more stable funding for planned growth in its international credit card business.
The bank will from Monday target US savers with an instant access account and longer-term cash products that pay interest rates of up to 1.75 per cent for five-year deposits.
Barclays does not have a retail branch presence in the US and has no plans for one. It has provided credit cards there through its Barclaycard arm since it bought a Delaware-based lender in 2004. Executives, who shelved early plans to buy a big US retail bank in 2010, have ruled out further expansion of the US retail business at this stage, according to people close to the bank.
The decision to fund its credit card book from local retail deposits – rather than a combination of wholesale funding in the US and UK – was intended to create a simpler and more efficient structure, Barclays said.
It will help smooth currency movements and could provide cheaper funds than the bank is able to access elsewhere.
“We are launching a spectrum of rates – paying from 0.35 per cent to 1.75 per cent,” said Steve Carp, managing director of deposits for Barclays US. “This is attractive funding for us.”
By comparison, banks are paying more than 4 per cent on five-year cash bonds in the UK, while the best instant access accounts are offering about 3 per cent, according to Moneyfacts.co.uk, the comparison site.
Also, wholesale funding is becoming more expensive for UK banks as they are dragged into the debt crisis sweeping through Europe.
Barclays’ move is expected to please regulators, which increasingly want banks to match their overseas liabilities with money raised in local markets. They believe this would make institutions’ problems easier to resolve if they ever ran into financial difficulties.
It comes as the bank plans to expand its £23bn credit card book both in the UK and overseas.
Barclays also has card divisions in Germany, South Africa and Scandinavia. It launched its first retail savings account in Germany this year, which it said attracted €1bn of funds in three months through 20,000 new accounts. The bank said it did not have specific targets for the new US account.