Barclays, ABN AMRO on road to merger

Barclays of London is in talks with ABN AMRO Bank of The Netherlands about a possible merger in what would be Europe's biggest financial-services merger. If the merger sees the light of the day, it would be the largest cross-border merger ever in the European banking industry.

The deal would create a combined company with market value of more than £80 billion, or $155 billion, with businesses in the United States and Africa, as well as Europe. For Barclays, an acquisition of a bank the size of ABN AMRO would place it among the leaders in the global banking industry.

Barclays Chief Executive Officer John Varley has made his intentions clear and stated that he wanted the London-based bank to grow aggressively. To reach that goal, the bank would consider purchases to enter emerging markets. ABN AMRO with its branches in 53 countries would help Barclays to extend retail banking outside the U.K. and build up its securities, asset- and wealth-management arms.

Guy de Blonay, a London-based fund manager at New Star Asset Management Group Plc, said, "It makes sense on a strategic and geographical basis. Barclays is looking for something in Brazil, more in the U.S. and wants to expand in Italy."

Barclays only has presence in India in Asia-Pacific region. It can tap ABN AMRO's markets in Singapore, Hong Kong, Taiwan, China, Pakistan, Indonesia and Malaysia.

Netherland based ABN AMRO has assets of over US $504 billion and ranks among the top 10 banks in the world in size and strength. Its international network comprises 3,568 branches and offices in over 320 cities and 76 countries and territories.

On the other hand, Barclays is a UK-based financial services group, with a large international presence in Europe, USA, Africa and Asia. It is engaged primarily in banking, investment banking and investment management. In terms of market capitalization, Barclays is one of the largest financial services companies in the world. It has been operating for more than 300 years with 27 million customers and 122,600 employees in over 50 countries.

Barclays’ shares have more than doubled in the past four years. On the other hand ABN shares woefully underperformed. A deal would vault it into the premier stratum of global banks. There is little doubt that management will remain in Barclays’ hands.