Barclays 'talks over €116bn merger'

Barclays is considering plans to merge with Dutch bank ABN Amro in a move creating an £80bn (€116bn) banking giant, it was reported today.

The UK’s third largest bank has made an informal approach to ABN Amro over the potential merger in the last month, the Sunday Times newspaper reports.

If the bank agreed, the deal would help Barclays overtake Royal Bank of Scotland to become the UK’s second largest bank and place it as a serious rival to the world’s two largest banks, Citigroup and HSBC.

The tie-up would create a bank with 47 million customers, and more than 220,000 staff, in what would be Europe’s biggest ever cross-border banking deal.

Barclays has a market valuation of £45bn (€65bn) compared with ABN Amro’s £36bn (€52bn). The two banks have held serious discussions over a potential tie-up two years ago, but failed to agree a deal after resistance from ABN Amro chairman Rijkman Groenink.

But pressure on Mr Groenink has grown as the Dutch bank has come under public attack from two hedge funds, the Children’s Investment Fund and Toscafund, over the bank’s underperforming share price. The funds demanded a sale or break-up of the business.

Barclays wants to benefit from the Dutch bank’s presence in fast growing markets including Brazil, a Chicago-based US banking business and Italian banking group Antonveneta, which ABN Amro bought in 2005.

ABN Amro’s strong presence in Asia is also attractive to Barclays, the newspaper reports. Both banks were unavailable for comment today.

Barclays posted pre-tax profits up by more than a third to £7.14bn in February as the ’big five’ UK banks posted profits of nearly £40bn over the last month.

ABN Amro produced pre-tax profits of €4.78bn in 2006 - below consensus forecasts – although the bank attempted to cheer investors with a €1bn share buy-back.