British bank Barclays, PLC may be in the market for a U.S. consumer unit. It already has a significant presence in U.S. investment banking, which was much enhanced with its lucrative acquisition of the scraps Lehman left behind. But that's not enough: the bank wants more of a one-stop shop that could serve consumers and businesses alike. This might sound good in theory, but I think it's a pretty bad idea.

BusinessWeek reports:

The London-based company is interested in buying a U.S. consumer bank to increase customer deposits, the Wall Street Journal reported yesterday, citing unidentified people close to the situation. Barclays spokesman Alistair Smith declined to comment on the story.

"It does not make a lot of sense," said Jane Coffey who helps manage $51 billion of investments including Barclays stock at Royal London Asset Management. "Very few European banks have made a success of buying U.S. retail banks and almost all have lost their shirts doing it," she said, citing HSBC Holdings Plc's acquisition of subprime lender Household International Inc.

Coffey is exactly right. There are few times when it's quite easy to identify the single worst decision that a firm has ever made. But it's rather uncontroversial to say that HSBC has never regretted anything as much as it does getting involved in U.S. banking. Its ill-advised acquisition of Household resulted in the bank issuing its first profit warning in its 142-year history back in late 2006. That marked the beginning of the credit crisis. If HSBC was in trouble, no one was safe. Billions in losses for the bank, related to bad loans in the U.S., followed.

Now don't get me wrong: HSBC isn't Barclays. But they are the #1 and #2 British banks. And British banks are historically quite conservative. U.S. banks, traditionally, haven't been. Now that may change for the time being, given current credit conditions, but this new attitude on the part of U.S. banks probably won't last long.

If Barclays is serious about buying a U.S. consumer unit, then it needs to be very, very careful. It probably can't afford a big bank, so it will need significant management oversight, as the operation won't be as well-developed as, say, a Citi, Chase or Wells Fargo.

That means that it should seek as conservative a U.S. bank as possible. This was HSBC's big mistake. The British behemoth pretty much defines what it means to be a conservative bank, yet it purchased a subprime consumer unit. This was a very poor decision. If a bank was ever involved in subprime lending for example, then it's probably a bad fit for a British bank's acquisition. That doesn't leave many options for Barclays to choose from if it wants a bargain, but for there to be any chance that the cultures of the two institutions click, I think this condition must be met.

I'm pretty unconvinced that right now is a good time for bank acquisitions in general, however. Sure, banks are still relatively cheap. But many assets on banks' balance sheets still have unclear values. More importantly, regulatory uncertainty has probably never been greater. If the framework that a business competes in is subject to drastic change, you can't determine how much money it can make going forward. Without knowing that, how would you know the right price to pay? As long as asset prices lack stability and broad financial reform is pending in Washington, Barclays will find it impossible to determine how much a potential target is worth.

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