Barclaycard eyes expansion in the US and Germany

Amer Sajed, promoted to run Barclaycard in April, says he has the backing to expand in markets like Germany and the US from Staley, the chief executive officer shrinking Barclays by getting it out of businesses like African banking. After joining the executive committee, the advocate for growth has a say in how the bank’s resources will be deployed.

Since 2006, profit from credit cards has quadrupled, while earnings at the securities unit have fallen by a quarter. Barclaycard accounts for 25 percent of the bank’s profit, generates the highest returns and has helped prop up the troubled investment bank for eight years since the financial crisis.

According to Sajed, the extra capital will be used to invest in technology, attract customers and rebalance the division, which currently gets most of its revenue from interest on customer balances rather than interchange fees bank charge retailers when individuals make purchases with their cards.

Barclaycard will revamp its rewards program as soon as this year to get customers to use their cards more, while a European cap on interchange fees will force rivals to cut back on their own rewards, he said.

Considering the valuation of rivals, it could also be worth more as a standalone business, with Barclays trading at a 50 percent discount to book value.

PayPal has a market value of USD 46.1 billion, surpassing Barclays’s own USD 45.8 billion. WorldPay Group is worth more than 5.4 billion pounds (USD 8 billion), more than double the price buyout firms paid to buy the payments company from Royal Bank of Scotland Group Plc six years ago. Bernstein’s Barua estimates Barclaycard could be worth 12 billion pounds as an independent entity.

Sajed claims to have twice the payment turnover of PayPal, yet that company’s share performance outshines Barclays. The bank’s stock is down 16 percent in 2016, partly because Staley has halved the dividend for two years, but also because fines and volatile performance at the securities unit stoked negative sentiment.

Barclaycard is one of the most profitable businesses at a major European bank. Only it and UBS Group AG’s wealth-management business both made more than USD 2 billion in pretax profit and generated a pretax return on equity of more than 25 percent last year, according to data compiled by Bloomberg.