Barclays: Quietly Conquering America

Given the Barclays motto, “Quietly conquering the world of finance,” no one can know for sure what the bank has up its sleeve. But there is nothing quiet about spending $300 million for the rights to name a planned 18,000 seat basketball arena in Brooklyn after itself.For Barclays, this salvo signals how important America is to the company’s growth strategy, and how much it wants to raise public awareness of the bank, according to the co-president of Barclays Capital, the bank’s New York-based investment banking arm, Grant Kvalheim.“Growing in the United States is key to our overall success,” Mr. Kvalheim told The New York Sun. He said the 20-year agreement with the developer of the arena, Forest City Ratner, was a symbol of the bank’s long-term commitment to the American market.Some commentators are wondering why a United Kingdom-based bank with significant investment banking operations in New York — but no retail operations — would choose a mass-market tool like a sports sponsorship to brand itself.Analysts estimate that Barclays Capital’s profits in America account for about one third of its worldwide profits, which were $2.2 billion in the first half of 2006.The Nets arena announcement was followed a few days later by the news that Barclays was purchasing EquiFirst Corporation, a mortgage business in America, for $225 million, only fueling speculation Barclays was launching an aggressive campaign to develop its stateside business. One analyst with the firm Keefe, Bruyette, and Woods surmised in a research note that Barclays was poised to make another, more significant American acquisition.If that’s the case, Mr. Kvalheim is not telling. But, he said, “We are focused on building our business organically, rather than through acquisition.” He said he thinks America is “underweighted” in worldwide Barclays operations, and he wants to build it up.Though the man on the street might be only vaguely familiar with Barclays as a foreign bank, it’s an established player on Wall Street. Some 2,000 people work at its Park Avenue office, along with another 400 back-office workers in Whippany, N.J. Crain’s New York ranks it as the 12th largest investment bank in New York, as measured by American debt and equity offerings, which totaled $114 billion in 2005.Barclays sold its American consumer banking operations in the late 1980s. Despite the absence of retail, brick and mortar banks, Americans — not just Wall Streeters and institutional investors — do a lot of more business with Barclays than they realize.Barclays Global Investors, based in San Francisco, is behind the popular Exchange Traded Funds, better known to the public as iShares. Retired New York State employees might want to know this division of Barclays managed some of their Common Retirement Fund, for which it earned $26 million in fees in 2005 to 2006. What’s more, over 3.2 million Americans hold credit cards issued by Barclays for a number of partners, including US Airways.Until now, the bank’s only significant branding effort in America has been to sponsor the annual Barclays PGA golf tournament in Westchester County, for which it has the naming rights until 2012 at a reported cost of $10 million.Of course, golf in Westchester is a more obvious way to reach the Wall Street power brokers and opinion shapers Barclays deals with than basketball is. But that’s the point, said the California-raised Mr. Kvalheim, an avowed basketball fanatic and Los Angeles Lakers fan. “I like the Nets a lot,” he added.“We’ve had business success in excess of what the public thinks, so we want to step up our profile,” Mr. Kvalheim said.And beyond the obligatory niceties of supporting community development (the Develop Don’t Destroy Brooklyn advocacy group, and other Atlantic Yards opponents that brought up Barclays role in the slave trade, might beg to differ), there are pragmatic considerations beyond this recordbreaking sponsorship for an arena.“This deal brings us into closer association with Forest City Ratner, which has been so successful in commercial real estate, an area of growth and focus for us,” Mr. Kvalheim said of one of his most important clients.This deal is just the most recent between major financial institutions and sports venues in the New York area. In November, Citigroup set a record by spending $400 million for the naming rights for the New York Mets’ new stadium for more than 20 years. Last month, Prudential Financial paid $105.3 million for the right to the name of the New Jersey Devils’ new home in Newark, N.J.But in the cases of Citigroup, Prudential, and ING, which has the naming rights to the New York City Marathon through 2010, all have significant retail operations to sell to the greater public. So for Barclays, mostly a business-to-business bank, is this money well spent?The president of the New Yorkbased branding consultancy, Brand Keys, and a former Citibank executive, Robert Passikoff, thinks so. He says it is a way to kick start public awareness. “There’s no other reason for them to do this other than that no one knows them,” he said. “The heritage of the company is not solidly linked to American values, and what’s more American than basketball?”ING, another foreign-owned bank best known in America for its 401(k)’s and online banking has found sponsoring the New York City Marathon and several others in North America to be an effective way to raise awareness. “We went from 10% awareness to 80% awareness of our brand,” the chief marketing officer for ING U.S. Financial Services, Toby Hoden, said.A professor of sports marketing at the University of Oregon’s Warsaw Sports Marketing Center, Dennis Howard, believes banks, with their deep pockets, have jumped on the naming rights bandwagon without empirical evidence that it pays off. “There is a herd mentality to this,” he said.And since 70% of major sports venues in North America have corporate names, up from 37% just 10 years ago, Mr. Howard says their effectiveness has been diluted. What’s more, Barclays will be vying for attention in a marketplace along with Citi, Prudential, and whoever sponsors a future new Giants and Jets stadium.Still, for financial companies like Barclays, $300 million is chump change, explaining why they are leading the naming charge. But in the absence of any Barclays plan to go retail, “it makes me scratch my head,” Mr. Howard said.

Barclays: Quietly Conquering America

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