Barclays explores merger with Standard Chartered

'Hypothetical combinations' with other lenders, including Deutsche Bank, Credit Suisse and DBS, also discussed by Barclays directors

Barclays has been exploring a potential merger with rival  banks including Standard Chartered, as  part of wide-ranging contingency plans  being weighed by senior board members  following pressure from an activist investor, the Financial Times reported.

Chairman John McFarlane was at least  theoretically keen on the idea of combining with Standard Chartered, and  was supported by Deputy Chairman Gerry  Grimstone, the FT reported, citing two  unidentified people close to the situation.  “Hypothetical combinations” with other  lenders including Deutsche Bank, Credit Suisse Group, and DBS Group  Holdings, have also been discussed by  Barclays’s directors, the newspaper  reported.
 

Barclays has come under increasing  pressure since Edward Bramson’s  Sherborne Investors revealed its 5.2  per  cent stake in March. Jes Staley, the former JPMorgan Chase & Co executive who leads Barclays, has bet his reputation  on boosting returns and overhauling the  investment bank, which is still by far  Barclays’s worst-performing division after  years of restructuring.

A private conversation took place between a director at Barclays and Standard Chartered about the possible benefits of  such a deal, though no bid approach had  been made, one of the people said,  according to the FT. There has been no  formal discussion of the potential  combination on the Barclays board, one of  the people said.

Representatives for Standard Chartered in  Singapore and Barclays in Hong Kong  declined to comment when reached by  Bloomberg. Standard Chartered shares  surged in Hong Kong on Wednesday and  were trading up about 4 per cent as of noon  local time, set for the biggest gain in  almost a year.

Meanwhile, Standard Chartered said it’s focused on its strategy and isn’t responding to “speculation” in a newspaper report that Barclays has been exploring a potential merger with the emerging markets lender.

Barclays hasn’t held discussions with Standard Chartered and the British bank isn’t actively pursuing a deal, according to a person familiar with the company’s thinking. “We are entirely focused on executing our strategy, and do not comment on this
type of speculation,” Standard Chartered said in an emailed statement following the report.

Barclays shares were little changed at 8:20 a.m. in London, while Standard Chartered traded up 1.8 percent.

The FT cited an unnamed person who knows Bramson as saying he’s likely to call for Barclays to return to shareholders much of the 25 billion pounds ($33.5 billion) of capital tied up in its corporate and investment banking division by shrinking the unit.

A potential takeover of Standard Chartered would bring together the transatlantic focus of Barclays in the U.K. and U.S. 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, Staley also reiterated a pledge to return an increasing amount of cash to shareholders through dividends and buybacks.

        Deal street

• Barclay’s potential merger is part of its wide-ranging contingency plans
• A private conversation took place between a director at Barclays and Standard Chartered, says a report in FT
• Barclays under pressure since Edward Bramson’s  Sherborne Investors revealed its 5.2 % stake in March
• Standard Chartered says Barclays hasn’t held discussions with it