DAVOS, Switzerland (Reuters) - Barclays <BARC.L> sees tougher market conditions in the next year as an opportunity for its investment banking arm to grow and invest, particularly in the United States, the bank's president said.
By Clara Ferreira-Marques
DAVOS, Switzerland (Reuters) - Barclays <BARC.L> sees tougher market conditions in the next year as an opportunity for its investment banking arm to grow and invest, particularly in the United States, the bank's president said.
Barclays Capital has seen spectacular growth over the past decade, but Britain's third-largest bank has yet to match its strong European and Asian debt capital markets presence in the United States, where it competes with Wall Street's giants.
"2008 brings one very important change to our priority list, and that's the United States. It is difficult to get into the home market of the U.S bulge-bracket firms, but as we go into 2008, so many of them are retrenching," said Bob Diamond, president of Barclays and head of its investment banking arm.
!ADVERTISEMENT!"I am determined that in two, three or four years' time we don't look back and say this was the market opportunity to move up into the top tier and we flinched," he said on Friday.
U.S. banks have been badly scalded by the crisis in the subprime mortgage market, reporting tens of billions of dollars in writedowns and huge capital injections.
Valuations have been battered, but Diamond said Barclays was unlikely to grow its U.S. presence by acquisitions as prices remained too high for the risks involved in a deal.
"(Acquisitions) are very unlikely in the United States and very unlikely in investment banking," he told Reuters in an interview. "I would never say never, but I think the success of BarCap is the talent and culture, the organic growth."
Barclays missed out on Dutch bank ABN AMRO last year, with rival Royal Bank of Scotland <RBS.L> and two other banks sealing the largest-ever bank takeover instead after a share price drop hit Barclays' cash-and-equity offer. RBS is now facing the complex task of integrating ABN's investment bank in a downturn.
"Would we have preferred to have purchased it at our price, on our terms? Of course. Are we relieved we are not trying to manage the integration as well as everything else? Of course."
COMMODITIES STRENGTH
Barclays' investment banking arm has seen strong growth in its Asian and commodities business, and Diamond said he saw that trend continuing, even if oil and other commodity prices come off the boil in 2008.
"Our strong result in commodities ... is not a result of a bull market. If prices deteriorate we are not going to pull back on that business," he said.
"It is always easier to achieve financial success in a trending bull market, but we are not dependent on that at all."
Barclays has not been immune to the credit crunch that has battered global banks, announcing a writedown of $2.7 billion in November for losses on securities linked to the subprime crisis.
Diamond said any major change from that would have had to have been announced to the market.
BarCap remained committed to its 15-20 percent long-term growth target through the cycle, but "2008 will be at the tough end of that," he said.
"It is too early to predict what 2008 is going to be like but we are certainly going into 2008 expecting it to fall into the category of tough year."
Speaking on the sidelines of a meeting of policymakers and business leaders in the Swiss resort of Davos, Diamond said he expected the worst to be over for the world's banks, after a year that has seen tens of billions of dollars in writedowns.
"We've seen the worst. We are bound to see one or two surprises, but I don't think they will be major," he said.
"I think we are going to see a workout situation for all of the firms for probably 2 or 3 years, the excesses of the market were so large."
(Reporting by Clara Ferreira-Marques; editing by Sue Thomas)
