Barclays ‘has no merger plans’
• Sources contradict speculation of a tie-up after newspaper reports that director had discussions with rival bank
Barclays is not actively exploring a potential merger with rivals, two sources close to the bank say, as speculation mounts about how the bank plans to defend itself against activist investor Edward Bramson.
The Financial Times reported on Wednesday that senior board members of Barclays were exploring a deal with another bank and that chairman John McFarlane was keen on the idea of a possible combination with Standard Chartered.
Barclays declined to comment on the report and a spokesman for Standard Chartered said: “We are entirely focused on executing our strategy and do not comment on this type of speculation.”
PRESSURE
Two sources close to Barclays said no deal was in the works and the bank had no plans to combine its operations with any of its rivals.
But the speculation about a potential deal comes as both banks face pressure from investors to boost returns after years of costly restructuring.
For Barclays, the Financial Times report said the moves were part of wide-ranging contingency plans being considered in response to pressure from activist investor Bramson, who has become one of its biggest shareholders.
CEO Jes Staley is betting that an aggressive push in investment banking will revitalise profits and dividends against a backdrop of dwindling competition from European rivals.
But New York-based Bramson wants Barclays to axe its expensive trading operations and focus on its retail, corporate and credit card businesses, which deliver superior and more dependable risk-adjusted returns, three sources familiar with the matter have said.
Standard Chartered shares rose 1.4% in intraday trade on Wednesday, while Barclays shares were trading down 0.7%, in line with the FTSE index of British banks.
Sources at Barclays said they had met Bramson but had not yet heard his full proposals for what changes he wanted to see.
Analysts were sceptical about the logic of a potential deal and its compatibility with Bramson’s aims of creating a leaner and more tightly focused bank.
NO SENSE
“Given Standard Chartered’s business mix, the suggested rationale, as a response to Bar- clays’s activist interest, makes absolutely no sense to us,” said Ian Gordon, analyst at Investec Bank in London.
The Financial Times report said that Barclays International unit chairman Gerry Grimstone supported McFarlane’s idea of a tie-up with Standard Chartered.
The Financial Times said that a private conversation had taken place between a director at each bank about the potential benefits of such a deal but no formal or informal bid approach had taken place.
Edward Firth, an analyst at KBW in London, said both banks
BOTH BANKS WERE GRAPPLING WITH STRATEGIC PROBLEMS THAT WOULD NOT BE RESOLVED BY A MERGER
were grappling with strategic problems that would not be resolved by a merger, pointing to Barclays’s underperforming investment bank and Standard Chartered’s inability to generate enough capital to exploit growth opportunities in its core Asian markets.
“One underperforming business plus another underperforming business give you a larger underperforming business,” Firth said. /