The City has questioned the rationale of any mega-merger between Barclays and FTSE 100 banking rival Standard Chartered, following speculation that Barclays was considering merger options.
Top bosses at Barclays, including chairman John McFarlane, have “kicked around” suggestions of possible tie-ups with rival lenders as part of its response to pressure from activist investor Edward Bramson, according to a report in the Financial Times.
A director from each bank has discussed the idea privately but no formal or informal bid approach has taken place, a source told the paper.
Any tie-up would create a £60bn banking behemoth. The two lenders currently have limited geographical overlap as Barclays is focused on the UK and US, whereas Standard Chartered concentrates on emerging markets in Asia and Africa.
Barclays is under pressure to improve returns after Mr Bramson’s investment vehicle, Sherborne Investors, built up a more than 5pc stake in the bank ahead of a likely campaign for a shake-up to increase profits.
Standard Chartered distanced itself from the report this morning, saying: “We are entirely focussed on executing our strategy, and do not comment on this type of speculation.” Barclays declined to comment.
Barclays shares fell 0.6pc and Standard Chartered was up 1.5pc in London this morning.
City investors and analysts questioned the rationale for any deal. “We see absolutely no strategic logic or rationale behind such a transaction,” Edward Firth, analyst at Keefe, Bruyette & Woods, said.
Mr Firth said that if the report was correct it was a “poor reflection on Barclays management that, when under pressure to deliver improved performance, rather than focusing on the 'nuts and bolts' of delivering incremental improvement, prefer to search for a 'rabbit out of the hat' solution”.
Ian Gordon, analyst at Investec, said the mooted merger seemed “farfetched” and “makes absolutely no sense to us”.
He said: “We struggle to see any material upside on a 'standalone' view, and do not see any obvious 'strategic fit' with Barclays.”
Martin Gilbert, co-chief executive of one of Standard Chartered’s biggest shareholders, Standard Life Aberdeen, told Bloomberg TV he would be “slightly surprised” if a deal happened after Barclays had sold their African division last year to raise capital.
But he added: “The sector needs to be larger, certainly against the very large US banks that dominate investment banking globally.”