Barclay's 'to detail merger plans'

Banking giant Barclays is poised to reveal its intentions over a potential £80bn (€117bn) merger with Dutch bank ABN Amro amid reports today that the pair had entered exclusive talks over the deal.

Barclays said it would make a statement “to clarify its position” before the opening of business tomorrow morning after speculation first arose at the weekend.

BBC News 24 reported tonight that the two banks were in talks over a merger but there were no official announcements and a Barclays spokesman described the report as “speculation”. ABN Amro refused to comment.

If agreed, the tie-up would create a bank with 47 million customers and more than 220,000 staff worldwide.

The deal would help Barclays overtake Royal Bank of Scotland to become the UK’s second largest bank and create a rival to the world’s two largest banks, Citigroup and HSBC.

But Barclays’ shares dropped nearly 1% today as some analysts expressed doubts about how much it might be forced to pay for its Dutch counterpart.

Panmure Gordon banking analyst Sandy Chen said: “Although we do think cost efficiency improvements could drive value creation in a merged group, a bid-fuelled jump in ABN’s share price could sap the potential.”

ABN Amro, which is listed on the Amsterdam stock exchange, saw its share price soar more than 9% today on news of the potential merger, valuing the firm at more than £39.6bn (€54bn).

The two banks first held serious discussions over a potential tie-up two years ago, but failed to agree a deal after resistance from ABN Amro chairman Rickman Groenink.

However, 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 markets including Brazil and Asia, as well as ABN Amro’s US and Italian based banking business.

Mr Chen added: “Broadly speaking, the two groups complement each other strategically, both in terms of geographical distribution and business mix.”