Barclays has been privately exploring a possible merger with rival international banks, including Standard Chartered, in response to pressure from an activist investor who has become one of its biggest shareholders.
The exploratory conversations are part of wide-ranging contingency planning being considered by senior board members in response to the pressure from Edward Bramson’s activist investment fund Sherborne, which recently acquired 5.4 per cent interest in the bank, people briefed on the talks said.
According to Financial Times, two people close to the situation said John McFarlane, Barclays chairman, was keen on the idea of a combination with StanChart, at least in theory, and was supported by Sir Gerry Grimstone, who chairs its Barclays International unit.
One of the people said 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.
One senior banker involved in the potential deal said: “John [McFarlane] has a real affinity for Standard Chartered.” Another said of the potential deal: “It would be logical but I’d be very surprised if anything came of it.”
Barclays shares opened lower after the Financial Times reported the discussions, dropping 0.9 per cent to 208.55p before a small recovery in midday trading. StanChart was up more than 2 per cent at the open, rising to as much as 787.3p before paring gains.
The possible combination with StanChart, which has a £25bn market capitalisation, is only one of many options being kicked around by Barclays directors in response to Mr Bramson’s intervention. Barclays and StanChart declined to comment.
Jes Staley, chief executive of Barclays, met Mr Bramson in New York earlier this month and was told by the activist investor that he was still finalising his strategic proposals for the bank.
One person who knows Mr Bramson well said he was likely to call for Barclays to return to shareholders much of the £25bn of capital tied up in its corporate and investment banking division by shrinking the long-underperforming unit.
Contingency plans discussed by some Barclays directors include: ways to return more capital to shareholders options to expand the bank’s ringfenced UK business and hypothetical combinations with a range of other banks, including Deutsche Bank, Credit Suisse and DBS in Singapore.
There has been no formal discussion of the potential combination with StanChart on the Barclays board, said one of the people briefed on the situation, who added that it had not been the subject of any detailed work or been discussed between executives and non-executives of the bank.
One Barclays insider said it had been scanning the horizon like all bank boards do on a regular basis.
Mr McFarlane, who worked at StanChart earlier in his career, was said to have been pained at Barclays’ withdrawal from Africa, a decision taken more on the grounds of accounting than strategic rationale.
“Selling Africa pulled his guts out,” said one close friend. StanChart is one of the few banks with a strong pan-African franchise.
The deal would have the merit of bringing together two institutions with a neat geographic fit. It could also bring in a chief executive of the combined operation in the form of Bill Winters, the StanChart boss who was senior to Jes Staley, the Barclays chief, when the two men worked in the upper echelons of JPMorgan Chase.
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