“The experience of foreign banks in Spain is bad. Many of them have tried and most failed. The Spanish banking industry has a very solid position and it is not easy to win market share here. US, French, British and German firms with commercial experience and financial muscle such as Citi, BNP or Barclays have attempted to do it”, The Corner’s senior analyst Fernando G. Urbaneja writes.
These words can in part explain Barclays’ decision to leave Spain.
The British entity announced such an intention some months ago, but it was on Thursday that the managing team revealed the bank’s plan to gather its Spain’ s retail banking business in a sort of ‘bad bank’. The decision comprises other non core assets such as Barclays’ networks in Italy, France and Portugal.
The financial crisis hit Barclays to the same extent that their Spanish counterparts, or even harder. The entity announced in 2011 the sector’s highest real estate non-performing loans rate. 58% of credit was bad debt, four times the Spanish banking industry’s average. Even though the UK’s bank has been forced to strongly provision capital, it still holds 1,560 properties pending of awarding or eviction.
However, problems for Barclays in Spain started in 2003 when they bought the medium-sized entity Banco Zaragozano for €1.1 bn. The reality was that this bank’s business profile did not fit Barclays’, but also the British apparently were not able to take enough profit of the transaction.
Spain is Barclays’ major retail market out of the United Kingdom having mortgages for near €15 bn. In fact, the bank became the fifth Spanish entity as well as the biggest foreign one. Barclays is operating in the country since 1974 within retail, corporate, investment and private banking. The total staff was 2,800, of which 2,200 worked in the retail sector, distributed in 271 offices.
“The previous Spain’s banking crisis in the 80’s opened the door to foreign entities as purchasers of rescued banks, but none of those operations resulted brilliant, or won enough market share to justify the efforts,” Fernando G. Urbaneja concludes.