Barclays plc History
London EC3P 3AH
Telephone: (207) 699-5000
Fax: (207) 283-5055
Incorporated: 1896 as Barclay & Company, Ltd.
Total Assets: £443.36 billion ($788.51 billion) (2003)
Stock Exchanges: London New York Tokyo
Ticker Symbol: BCS
NAIC: 522110 Commercial Banking; 551111 Offices of Bank Holding Companies
We aspire to be one of the most admired financial services organisations in the world, recognised as an innovative, customer-focused company that delivers superb products and services, ensures excellent careers for our people and contributes positively to the communities in which we live and work.
- John Freame forms a Quaker goldsmithing and banking firm.
- James Barclay becomes a partner.
- Twenty private banks merge to form Barclay and Company Ltd.
- The company merges with the London, Provincial and South Western Bank.
- Barclays merges with Martins Bank.
- The company changes its name to Barclays plc.
- Barclays becomes a holding company.
- Wells Fargo Nikko Investment Advisors is acquired.
- Parts of BZW are sold.
- The company purchases Woolwich plc.
With a rich history dating back almost 300 years, Barclays plc has grown into one of the largest financial services groups in the United Kingdom. The company is involved in banking, investment banking, and investment management and operates 2,000 domestic branches and nearly 850 international branches in over 60 countries across the globe. Barclays is organized into seven business units: Barclays Africa; Barclaycard; Barclays Capital; Barclays Global Investors; Barclays Private Clients; and UK Banking. The company has over 4.5 million registered online bankers and over 10.6 million Barclaycard customers in the United Kingdom. In 2003, Barclays was the world's ninth-largest bank based on market capitalization.
Barclays takes it symbol, the spread eagle, from the Quaker goldsmithing and banking firm founded by John Freame in 1728. In 1736, James Barclay, Freame's brother-in-law, became a partner in the Black Spread Eagle. When two more of Barclay's relatives joined the firm--Silvanus Bevan in 1767 and John Henton Tritton in 1782--the banking firm took the name by which it would be known for more than a century: Barclays, Bevan & Tritton. While fledgling joint-stock banks outside London struggled to establish themselves in the late 18th and early 19th centuries, Barclays, Bevan & Tritton was still occupied with the well-established and highly lucrative commercial life of London.
A series of legislative changes enacted in the late 19th century created a new banking climate that threatened the existence of private banks such as Barclays. First, the Bank Charter Act of 1826 allowed banks with more than six partners to be formed only outside London. In 1833, the geographical restriction was removed. Stockholders of new joint-stock companies were granted limited liability for the first time in 1854. Finally, in 1879, existing joint-stock associations were allowed to convert to a limited-liability structure.
Mergers in Late 19th and Early 20th Centuries
As a result of these legislative changes, provincial limited-liability joint-stock companies started picking off private banks. After lengthy negotiations, three of the largest Quaker-run banking firms--Barclays (which had become Barclays, Tritton, Ransom, Bouverie & Company after a merger in 1888), Jonathan Backhouse & Company, and Gurneys, Birkbeck, Barclay & Buxton, along with 17 smaller Quaker-run banks, agreed to merge and form a bank large enough to resist takeover attempts. Barclays took its modern form in 1896 when the 20 private banks merged to form Barclay and Company, Ltd., a joint-stock association with deposits totaling an impressive £26 million. This marked the beginning of Barclays' tradition of service to farmers and fishermen.
Francis Augustus Bevan, grandson of Silvanus Bevan, served as the new bank's first chairman for 20 years. The company's structure and course, however, were directed for its initial 40 years by Frederick Crauford Goodenough, as first secretary, until 1917, and then as chairman after Bevan's retirement until his own death in 1934. Goodenough was the only chairman recruited from outside the original founding families until 1987. Recruited from the Union Bank of London, Goodenough remained aloof from family controversies and quickly proved his merit.
Goodenough's first task was to meld the constituent banks into a single enterprise. He took a decentralized approach that was to be Barclays' hallmark for most of the 20th century. Each member bank was independently operated under the control of its own board of directors. Senior partners of the constituent banks were given a seat on the Barclays board. In this way, longstanding relationships between each member bank and its customers were maintained, and the new company took advantage of the knowledge and experience of its leaders.
At the same time, Goodenough initiated a series of mergers which eventually made Barclays one of the largest banks in Great Britain. In its first 20 years, Barclays acquired 17 private banks throughout England, including Woods and Company of Newcastle upon Tyne in 1897, Bolitho Bank in Cornwall, and United County Banks, its first joint-stock bank acquisition, in 1916. The bank's merger with the London, Provincial and South Western Bank in 1918 made it one of the Big Five British banks. During this period, Barclays merged with 45 British banks and its deposit base grew to £328 million.
This era of banking amalgamations came to an end in 1919, when the Colwyn Committee recommended, and banking authorities unofficially adopted, limitations on previously unregulated bank mergers. The committee suggested that thenceforth the Bank of England and the treasury approve only those mergers that provided important new facilities to customers or secured significant territorial gains for larger banks. Mergers were no longer approved if they resulted in a significant overlap in the areas served by constituent banks without countervailing benefits to customers or if they would result in "undue prominence" for a larger bank. After the Colwyn Committee report, mergers were increasingly difficult to justify, and the consensus was that mergers among the Big Five would not be approved.
International Expansion in the 1910s and 1920s
After Barclays' expansionist phase ended, Goodenough turned his attention to international banking operations. Barclays' first international venture took place in 1914 when it established its French subsidiary, Cox & Company. Goodenough had a vision of a network of Barclays banks spanning the globe to the greater glory of the British Empire. As early as 1916, he started preparations for worldwide banking by acquiring the shares of the Colonial Bank, established in 1836 to provide banking services in the West Indies and British Guiana. The Colonial Bank's charter was extended by special legislation to British West Africa in 1916 and then worldwide in 1917.
Immediately after World War I, Goodenough began negotiations with the National Bank of South Africa Ltd. and the Anglo-Egyptian D.C.O., operating in the Mediterranean. Despite the opposition from the Bank of England, which feared Barclays would become overextended, Goodenough engineered the 1925 merger of the two banks with the Colonial to form Barclays Bank (Dominion, Colonial & Overseas), later renamed Barclays Bank (D.C.O.). Although Goodenough never realized his dream of establishing banks throughout the British Empire, for decades Barclays was the only British bank to combine domestic business with a widely dispersed international branch network.
A contemporary of Goodenough speculated that the chairman became interested in expanding Barclays' international operations because domestic growth was very limited. Despite this stagnation and later the Great Depression, Goodenough's plan did not result in a disastrous overextension of the bank's assets.
Barclays survived the Great Depression relatively intact to take its place as a leading wartime financier. Goodenough died in 1934 and was replaced by William Favill Tuke, who was in turn replaced in 1936 by Edwin Fisher. Fisher saw Barclays through the boom years of World War II. When Fisher died in 1947, he was replaced by William Macnamara Goodenough.
In 1951, Anthony William Tuke, the son of William Favill Tuke, became chairman following William Goodenough's retirement that year. A.W. Tuke was essentially conservative but encouraged innovations, even those he personally disliked, that were potentially beneficial to the bank. Under Tuke's leadership, Barclays became Britain's largest bank, surpassing the Midland Bank in the late 1950s. Barclays was also a leader in introducing new banking technology. In 1959, Barclays was the first British bank to use a computer in its branch accounting; it also introduced the world's first automatic cash-dispensing machine and started a plastic revolution in Britain by introducing the Barclaycard in 1966.
Barclays Enters U.S. Market in 1965
In the late 1960s and early 1970s, when most competitors were struggling to establish international operations, Barclays enjoyed an enormous head start, since its operations in former British colonies in Africa and the Caribbean were well-established. The economies of many of these countries, however, were precarious. To offset its high exposure in developing countries, Barclays decided to enter the U.S. market. It first established Barclays Bank of California in 1965, and then, in 1971, formed Barclays Bank of New York. Together these two banks gave Barclays the unique advantage of having retail banking operations on both U.S. coasts. Another advantage Barclays enjoyed was an exemption from 1978 legislation barring foreign banks from operating branches in more than one state.
In 1967, British banking authorities clarified their position on domestic mergers. The National Board for Prices and Incomes stated that mergers would be allowed to rationalize existing networks and that further reduction in the number of independent banks would not be viewed as inherently anti-competitive. Barclays quickly took advantage of the change in policy by merging with the venerable Martins Bank in November 1968. Established by Sir Thomas Gresham, chief financial adviser to Elizabeth I and founder of the Royal Exchange, Martins Bank, the sixth-largest in the country, brought Barclays more than 700 branches, mostly in northern England.
In 1973, A.W. Tuke was succeeded as chairman by Anthony Favill Tuke, William F. Tuke's grandson. A.F. Tuke served until 1981, when he left Barclays to operate a British mining company. His tenure was most notable for Barclays' expansion in North America. In May 1974, Barclays Bank International acquired the First Westchester National Bank of New Rochelle, New York. In the late 1970s, Barclays opened a series of branches and agencies in major U.S. cities. By 1986, North American operations had extended to 37 states. In the early 1980s, Barclays Bank International diversified into commercial credit, acquiring the American Credit Corporation, renamed Barclays American Corporation (BAC) in May 1980. Later that year, BAC acquired 138 offices from subsidiaries of Beneficial Finance and the operations of Aetna Business Credit Inc.
Restructuring in the Early 1980s
In June 1981, Timothy Bevan became chairman of Barclays and immediately, with the assistance of United Kingdom Chairman Deryk Weyer, set about restructuring domestic operations. The system of local control initiated by F.C. Goodenough had become outdated as the bank expanded and diversified. Senior managers' responsibilities were not clearly defined, and, although technically higher in authority than regional bank directors, in practice the senior managers were subject to the regional officials' control as board members. Moreover, the original structure of the company tended to produce dynasties. Weyer's strategy was to establish three basic divisions to represent Barclays' most important markets--the large corporate market, the middle market of small- to medium-sized businesses, and the traditional individual-customer and mass-consumer market. Bevan and Weyer moved cautiously, however, avoiding wholesale reorganization of the company so that the relationships of local managers with large customers were not disrupted.
Further changes in the structure of the company followed. Barclays had converted from a joint-stock bank to a public limited company in 1981, and it assumed its present name in 1984. In 1985, Barclays became a holding company and all of its assets were transferred, in exchange for stock, to its operating subsidiary, Barclays Bank International Ltd., which was simultaneously converted to a public limited company and renamed Barclays Bank plc.
In 1986, Barclays acquired Visa's traveler's check operation, becoming the third-largest issuer in the world with 14 percent of the market. That same year, in preparation for the deregulation of the British securities market, Barclays Merchant Bank Ltd. de Zoete and Bevan and Wedd Durlacher Morduant & Company merged to form Barclays de Zoete Wedd (BZW), a new investment-banking enterprise.
Challenging Environment in the Late 1980s
Chairman John Quinton, appointed in May 1987, faced a number of challenges in the late 1980s. Domestic banking had always been Barclays' strength, but the bank faced increasing competition. National Westminster Bank edged out Barclays in assets. The building societies, by offering high interest on savings, threatened the bank's traditional deposit base. Finally, American and Japanese banks entered the commercial-lending market and began to pose a threat to British banks. Barclays fought back with two formidable money-generating enterprises, Mercantile Credit and the Barclaycard, which generated about 20 percent of Barclays' domestic profits. The bank also continued to rationalize its branches to better serve the three major banking-service markets. In addition, Barclays planned to spend more than £500 million on technological advances, including the introduction of the first electronic debit card in the United Kingdom.
Barclays' future in international banking was less certain. It was dealt a number of setbacks in the late 1980s. In 1986, Barclays divested its 148-year-old, wholly owned South African subsidiary, Barclays National Bank (Barat), in response to a disastrous drop in the subsidiary's earnings from 1984 to 1986 and to losses in the lucrative student market in Britain as Barclays' presence in South Africa became more unpopular at home. Also, the steady deterioration of African economies posed a hazard because the bank's African involvement was so heavy. Barclays decreased its African investments where possible but had difficulties in removing profits and proceeds from Africa. In addition, Barclays' Hong Kong and Italian operations both suffered large losses in the 1980s, and the performance of Barclays' American operations was consistently disappointing. In the early 1980s, Barclays expanded very rapidly and tried to build earnings quickly through an aggressive lending policy. As a result, branches picked up a large volume of low-quality loans. Bad-debt ratios were very high, costs were difficult to control, and American operations only started to show a profit in the late 1980s (only 4 percent of Barclays' profits were from U.S. operations, while 15 percent of the bank's assets were invested there). As a result, Barclays began offering specialized services in the United States in an attempt to improve its position there. Nevertheless, after years of trying to make it profitable, Barclays sold its California banking subsidiary in 1988 to Wells Fargo. The following year, Barclays sold its U.S. consumer finance unit to Primerica (later known as Travelers).
On the positive side, Barclays' investment-banking operations showed promise. BZW expanded its operations by purchasing 50 percent of Mears and Phillips, an Australian brokerage firm. Barclays also formed a new bank in Geneva, Barclays Bank S.A., to develop capital markets with BZW.
A Change in Strategy in the Early to Mid-1990s
Although Barclays began the 1990s in an expansion mode, the bank was soon forced into retreat. In 1990, Barclays acquired Merck, Finck & Co., a German investment bank, and L'Europeenne de Banque, based in Paris. However, extended recessions on both sides of the Atlantic led to numerous bankruptcies in the early 1990s, and many banks--including Barclays--suffered huge losses from bad loans. Barclays was forced to set aside £1.55 billion in 1991 and £2.5 billion in 1992 against these bad loans. Profits, already hurt by continuing high operating costs, plunged as a result. Barclays, in fact, posted a pretax loss of £244 million in 1992.
The bank's difficulties led to the early--and forced--departure of Quinton, who had been expected to stay on for a couple more years. Andrew Buxton, who had worked his way up through the ranks since joining Barclays as a trainee in 1963 and was a descendant of one of the company founders, became CEO in April 1992 and then added the chairmanship at the beginning of 1993. Although a Barclays' tradition, the dual appointment provoked controversy as institutional shareholders voiced concerns that the bank had grown too large for such an arrangement. Subsequently, in the fall of 1993 Barclays made the rare move--for Barclays--of tapping an outsider when it appointed Martin Taylor as CEO, with Buxton remaining chairman. Taylor had most recently led a turnaround at U.K. textile firm Courtauld Textiles that involved closing factories and restructuring the business.
In the midst of these management changeovers, Barclays began a retrenchment--which continued into the mid-1990s--whereby it reduced its far-flung operations, at least in selected countries and regions; undertook a massive cost-cutting program; and once again restructured its domestic retail banking operations. Barclays dramatically reduced its troubled U.S. operations, starting with its exit from U.S. retail banking in May 1992, through the sale of its remaining branches and assets to Bank of New York Co. In late 1994, Barclays Business Credit, a firm that offered asset-based lending to U.S. companies, was sold to Shawmut National Corporation for $290 million. In 1996, Barclays' U.S. mortgage unit, Barclays American Mortgage Corporation, was sold to Norwest Mortgage Inc. In addition to these American divestitures, banking operations in Israel were sold off, and Barclays' Australian retail banking subsidiary was sold in 1994 to St. George's Bank of Australia.
The most visible aspect of the cost-cutting program was the elimination of 18,000 jobs between 1990 and 1995. The majority of these cuts were made in the United Kingdom, most notably as a result of the restructuring of the bank's domestic retail branches. By late 1994, Barclays' domestic branch network had been cut to 2,080, a reduction of 21.5 percent since 1989.
Like most U.K. banks, Barclays benefited from the improved economic conditions of the mid-1990s, and as a result the bank was able to enhance its loan portfolio. Barclays had to set aside only £396 million in 1995 and £215 million in 1996 for bad loans. The bank's reduced foreign and domestic operations and cost-cutting moves, in concert with the improving economic environment, led to healthy before-tax profits of £2.08 billion in 1995 and £2.36 billion in 1996. Nevertheless, during these two years, Barclays continued to restructure, this time concentrating on its Asset Management Group. In 1995, the bank bolstered its presence in the Asia-Pacific region by purchasing Wells Fargo Nikko Investment Advisers, which was integrated into the Asset Management Group. Two years later, Barclays sold its global custody business to Morgan Stanley Group Inc.
Barclays neared the turn of the 21st century (and its 275th anniversary in 2003) in its strongest position in years. Although it would continue to face serious competition at home, the bank's restructuring of its domestic retail banking network seemed to be a success. As Europe slowly moved toward integration, Barclays smartly divested many of its non-European operations while seeking opportunities for continental expansion. At the same time, Barclays had retained some geographic flexibility by maintaining an international presence in investment banking through its successful BZW unit. Merger activity in 1997 however, placed this unit in a precarious position.
Late 1990s and Beyond
Intense competition forced Barclays' reorganization to continue in 1997. Large mergers, including the tie up of Morgan Stanley and Dean Witter and the merger of Salomon Brothers and Smith Barney, had left Barclays unable to compete in the global investment banking industry. As such, the company opted to sell off parts of its BZW unit in 1997. Credit Suisse First Boston purchased the European and Asian investment banking portion of the business while ABN Amro snatched up its Australian and New Zealand operations. Barclays opted to keep BZW's debt business, renaming it Barclays Capital.
As Barclays struggled to retain its market share over the next several years it dealt with several changes in management. The sell off of BZW was considered highly controversial among Barclays' shareholders, a fact that may have played a role in Taylor's resignation in November 1998. He was replaced by Michael O'Neill, an American executive who orchestrated the merger of Bank of America and Nations Bank. His appointment was applauded by many who felt Barclays' would benefit from his merger experience. Due to health problems, however, O'Neill quit on his first day, leaving Sir Peter Middleton at the helm of what many analysts were now considering a sinking ship. Matthew W. Barrett was named CEO in 1999 while Middleton remained chairman.
With a stable management team now in place, Barclays continued to revamp its organization. In 1999, it announced that 6,000 jobs would be eliminated from its U.K. workforce. It also set plans in motion to shutter up to 200 rural branches by 2000 as part of its strategy to focus on online banking. The company continued to eye growth and moved to acquire Woolwich plc in a $7.96 billion deal. The Wall Street Journal summed up the advantages of the union in August 2000, reporting that it would "double Barclay's presence in the U.K. mortgage sector to 8% and boost the bank's total client base to 16 million from 13 million, making it the third-largest financial institution in the U.K. based on number of customers." The article went on to state, "The takeover also gives Barclays one of the U.K.'s most successful online-banking ventures. Though Barclays has more online customers than any other bank in the U.K., Woolwich's Internet service is considered far more advanced." Barclays completed the transaction in 2000. It made another acquisition in 2003 when it added Spain's Banco Zaragozano to its arsenal. The $1.8 billion acquisition fit nicely into Barclays' strategy to grow its business in Europe.
Chairman Middleton announced that he would retire at the end of 2004, leaving Barrett to take over as chairman. John Varley was slated to assume the CEO position. At this time, the company focused on increasing revenues, controlling costs, and maintaining a cautious approach to risk management. While it looked to organic growth to bolster sales and profits, Barclays did not rule out the possibility of future merger activity. Pre-tax profits rose by 20 percent in 2003, a sign that Barclays' actions were paying off.
Principal Subsidiaries: Barclays Bank plc; Barclays Capital Inc.; Barclays Capital Investors N.A.; Woolwich plc.
Principal Operating Units: Barclays Africa; Barclaycard; Barclays Capital; Barclays Global Investors; Barclays Private Clients; UK Banking.
Principal Competitors: HBOS plc; HSBC Holdings plc; Lloyds TSB Group plc.
- Bailey, Martin, Barclays and South Africa, Birmingham: Haslemere Group, 1975.
- "Barclays Set for Expansion," Herald, August 6, 1999, p. 24.
- Bray, Nicholas, "Barclays Pursues Shrinkage to Achieve Solid Returns: Round-the-World Presence Is Played Down in Favor of U.K. Retail Banking," Wall Street Journal, October 31, 1994, p. B4.
- Caplan, Brian, "Is Martin Taylor's Halo Slipping?," Euromoney, March 1996, pp. 54-58.
- Crossley, Julian Stanley, The DCO Story: A History of Banking in Many Countries, 1925-71, London: Barclays Bank, 1975.
- "The Davidson Interview: Martin Taylor," Management Today, April 1996, pp. 40-44.
- "The Eagle Preens Itself," Economist, June 25, 1988, pp. 84-85.
- Great Britain Commission on Industrial Relations, Barclays Bank International, Ltd., London: HMSO, 1974.
- Green, Edwin, Debtors to Their Profession: A History of the Institute of Bankers, 1879-1979, New York: Methuen, 1979.
- "Half Way up to the Top of the Hill: Barclays Bank," Economist, August 13, 1994, p. 71.
- Hoffman, Abigail, "The Middleton Way," Sunday Telegraph, June 27, 2004, p. 8.
- "Is Might Right?," Economist, April 16, 1988, pp. 97-98.
- Lambert, Wade, "Woolwich Purchase Allows Barclays to Focus Elsewhere," Wall Street Journal, August 14, 2000, p. A14.
- "The New New Look: Barclays Bank," Economist, December 12, 1992, p. 86.
- "O'Neill to Be Chief at Barclays," Scotsman, February 12, 1999, p. 27.
- Paterson, Lea, "Barclays Chief Predicts More Bank Deals," Independent, December 23, 1997, p. 19.
- "Predators Eyeing up Rudderless Ship," South China Morning Post, April 15, 1999.
- "The Shake-Up in the Barclays Boardroom," Economist, April 25, 1992, p. 83.
- Tuke, Anthony, and P.W. Matthew, History of Barclays Bank Limited, London: Blades, East & Blades Ltd., 1926.
- Tuke, Anthony, and R.J.H. Gillman, Barclays Bank Limited, 1926-1969: Some Recollections, London: Barclays Bank, 1972.
- Valdmanis, Thor, "No Sacred Cows: Former Industrialist Martin Taylor Whips Barclays Back into Shape," Financial World, May 9, 1995, p. 34.
- Watkins, Leslie, Barclays: A Story of Money and Banking, London: Barclays Bank, 1982.
- West, Karl, "Banking on a Safe Pair of Hands," Herald, October 10, 2003, p. 23.
Source: International Directory of Company Histories, Vol.64. St. James Press, 2004.