Bank of America makes pounds 4bn play to acquire Barclaycard

BANK OF AMERICA has approached Barclays Bank with an offer to buy its Barclaycard business, which analysts value at around pounds 3.8bn.

The offer is believed to have come within the last three weeks, and may have been prompted by the talk that Barclays was contemplating a radical demerger of its retail and corporate banking businesses.

It has subsequently emerged that the demerger plan, which was rejected by the Barclays board, was the catalyst in the boardroom rift that led to Martin Taylor quitting as chief executive last Friday.

Analysts said that the Bank of America approach was opportunistic and unlikely to succeed. They said the priority for Barclays is to concentrate on getting the bank back on track after the damaging events of the past week.

The idea of selling Barclaycard would nevertheless have its attractions provided the price was right.

Barclaycard is suffering a slow attrition in the market place as new entrants from the United States such as MBNA and Capital One have moved aggressively into the British market, offering lower rates.

Barclays announced in late September that it was cutting 1100 jobs out of a total staff of 4,400 over the next three years. Barclays linked the move to a plan to invest more heavily in technology.

However, most analysts interpreted the announcement as a tacit admission that the market place for credit cards was getting tougher and that Barclaycard, as the market leader, was feeling the strain.

However, Barclaycard still has the strongest UK credit card brand and by far the biggest market position of any of the clearing banks. It enjoys a return on capital of 85 per cent and is expected to contribute pounds 300m or nearly 16 per cent of Barclays' pounds 1.9bn pre-tax profit this year.

Bank of America has been seeking a way of breaking into the fast growing European credit card market for several years. The bank recruited former Visa head Gene Lockhart to spearhead its European assault, although Mr Lockhart left the business in May after Bank of America's merger with rival Nationsbank.

Barclays insiders said that Barclaycard continues to be run within the Barclays group as a separate fiefdom.

There has been little attempt to integrate the business either operationally or in terms of cross-marketing mainstream banking services to credit-card holders, although the bank does make significant sums of money from selling insurance and travel packages to card holders.

Neither Bank of America nor Barclays were prepared to comment.