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Could Barclays really be set for Standard Chartered mega merger?

James Moore
The City would be excited at the prospect of a deal involving Barclays, but others are more likely to take the plunge: Reuters

A mega merger between Barclays and Standard Chartered? Yummy!

That was probably the reaction of half the City’s lawyers, investment bankers and PR consultants to the report saying the idea has been kicked around among Barclays directors. No, no, wait a minute. I’ve got that wrong. From the top dogs to the graduate trainees, they all said yummy!

They’d best curb their enthusiasm for now. There was more cold water being poured on the idea from Barclays towers than has leaked out of Thames Water’s pipes this year

The reason the story got the attention it did is due to the presence of activist Edward Bramson on the Barclays shareholder register, and the perception that the bank has got to do something to address him.

It isn’t quite clear how a major deal would do the trick, but it would certainly qualify as a “something” and might create enough excitement to drown Mr Bramson out.

People have, after all, been talking about Standard Chartered, which is focused on what are sometimes patronisingly referred to as ‘emerging markets’, and Barclays getting together for years.

The idea keeps coming up because a lot of people think it makes some kind of sense. But Investec’s Ian Gordon probably had the right of it when he described such a deal as “logistically prohibitive”, even were the two sides able to deal with the formidable regulatory challenges it would present.

A deal would also rather contradict Barclays group chief executive Jes Staley’s stated strategy of creating a focused, transatlantic bank with interests in retail, wholesale and investment banking.

It’s possible to poke holes in this grand plan, but it’s where Mr Staley has planted his flag.

The word is that he is buzzing, keen to push it through now he’s survived a £642,000 fine from the Financial Conduct Authority for attempting to unmask a whistleblower.

An even bigger ‘legacy’ issue has also gone his way: Barclays managed to get charges brought by the Serious Fraud Office relating to the bank’s 2008 fundraising dismissed, although the fraud-busting agency is set to try to get them reinstated.

There are many who think that the whistleblower issue should have led to Mr Staley’s resignation. But the board opted to back him. That being the case, it really ought to carry on doing so and face Mr Bramson down.

He has a right to his opinion as a significant shareholder. Barclays still hasn’t officially heard what it is, although its directors will have read the reports suggesting it involves gutting the investment bank. But he only has 5 per cent, and there hasn’t yet been much sign of others lining up to back him in significant numbers. So Barclays ought to be able to respond with a “thanks, we’ll take that under advisement”.

Meanwhile, those looking for a deal buzz should cast their eyes elsewhere, starting with Virgin Money.