Barclays investors sceptical of merger with StanChart

Barclays investors are dubious about the benefits of any potential merger with its British counterpart Standard Chartered, pouring cold water on a newspaper report.

There was also scepticism from inside Barclays about the likelihood of a deal taking place.

The possibility of a merger with emerging markets lender Standard Chartered is not being pursued and is not seen as practical as the bank completes its own strategic overhaul, according to a person familiar with the bank’s plans.

It follows a Financial Times report, which said executives weighed the combination.

“The answers are all no,” said Rob James, a portfolio manager at Old Mutual Global Investors, which holds Barclays stock.

“Barclays has laid out its stall as a transatlantic bank, and Standard Chartered doesn’t help that at all. It’s a low-returning business, just what Barclays doesn’t need.”

Barclays, with a market capitalisation of £36 billion (Dh176.47bn), has been exploring a potential merger with rivals including Standard Chartered. This forms part of wide ranging contingency plans being weighed by board members following pressure from activist investor Edward Bramson to shrink parts of the business and boost returns, the FT reported earlier.

No bid approach has been made, it said, citing unidentified people close to the matter.

Standard Chartered, which has declined to comment on the specifics of the report, has a market value of around £26bn.

“I would be slightly surprised after Barclays have sold off their African operations mainly for capital reasons, so we need to understand much more if indeed there is any substance,” said Martin Gilbert, co-chief executive of Standard Life Aberdeen.

Mr Gilbert would need more information before deciding whether to support a merger, he said.

Standard Life Aberdeen holds stakes in both lenders.

Barclays’s problem is an underperforming investment bank, while Standard Chartered’s is lack of capital generation to exploit the growth opportunities it has, according to Keefe, Bruyette & Woods analyst Edward Firth.

“We see absolutely no strategic logic or rationale behind such a transaction,” Mr Firth said.

Standard Chartered said earlier that it is focused on its strategy and is not responding to “speculation”.

A potential takeover of Standard Chartered would bring together the transatlantic focus of Barclays in the United Kingdom and United States with Standard Chartered’s concentration on Asia, the Middle East and Africa.

It would mark a sharp reversal in Barclays chief Jes Staley’s public strategy for the bank, which has sold down its holdings in Africa under his tenure.

Last month, Mr Staley also reiterated a pledge to return an increasing amount of cash to shareholders through dividends and buybacks.