Barclays reported to be exploring £60bn merger to head off Bramson

A man uses a cashpoint machine at a Barc
Barclays Bank reportedly examining merger options (Source: Getty)

Barclays Bank is reportedly exploring merger options with other banks in response to the acquisition of a stake in the bank by activist investor Edward Bramson.

The Financial Times (FT) reported this morning that Barclays directors had discussed responses to Bramson that included merging with a rival bank.

According to the report John McFarlane, Barclays chair, is keen on a deal with Standard Chartered and the FT reported that a conversation had taken place between directors of the two banks on the subject.

Read more: Barclays draws up contingency plans as it awaits activist investor move

A deal between the two could create a banking giant with a market capitalisation of more than £60bn on current valuations.

Standard Chartered is strong in Asia and Africa, the latter of which Barclays has largely retreated from over the past two years.

Standard Chartered’s share price rose by more than one per cent today while Barclays' fell by half a percent.

The discussions are part of the bank’s response to activist Bramson who in March built his stake in the bank to more than five per cent.

Read more: Bramson met with Old Mutual Global Investors to plot Barclays shake up

He has since been approaching fellow shareholders to gain support for his plans with ideas on the table including a shake-up or spin-off of Barclays investment bank.

Barclays directors have also reportedly discussed mergers with other banks including Credit Suisse, Deutsche Bank and DBS in Singapore.

Other discussions include ways to return more capital to shareholders and ways to expand the bank’s UK business.

Analysts were sceptical about the chances of the two banks managing a tie-up, if it even got to that stage.

Read more: Bramson betting on Barclays break-up

Michael Hewson chief market analyst at CMC Markets said: “Sounds like dinner table talk - two CEOs chewing the fat over a beer and a steak. I can see the synergies but in terms of capital requirements its a tall order, both banks are in the middle of restructuring programmes. There is not much in way of overlap but the extra capital they would have to raise makes any prospective deal difficult.”

Artjom Hatsaturjants, research analyst at Accendo Markets: “It is quite speculative and should be treated sceptically. As far as the rationale it makes sense to fend off some of the activist investor pressure, but whether this is the correct approach it is hard to say.”

A Barclays spokesperson said: “We don’t comment on speculation.”

A spokesperson for Standard Chartered said: “We are entirely focussed on executing our strategy, and do not comment on this type of speculation.”

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