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Daily Telegraph: High time for Barclays to make its mark abroad

Last Updated: 6:20am GMT 19/03/2007

Philip Aldrick examines the possibility of ABN Amro providing the perfect fit for the British bank

Bankers have been aching for Barclays to do a major deal. With its rapidly growing investment bank, highly respected management and well-known brand, the British bank has long been considered the ideal partner for an American or European rival.

Rumours of a potential merger with Société Générale and BNP Paribas, probably stoked by impatient bankers, have been doing the rounds for the past year. Memories of reported talks in 2004 with Bank of America are still fresh – resurfacing as recently as last December.
For all its British past, Barclays is a bank with global ambitions. Seven years ago, the international operations accounted for just 20pc of profits. Today, more than half come from overseas. But for all that ambition, Barclays has yet to unveil itself as a dominant presence on the global stage. It has crept into the world’s top ten by market capitalisation but there are still vast holes in its portfolio including a glaring lack of a US retail presence.

A tie-up with ABN Amro would fill many of these gaps. Barclays is strong in the UK, where ABN has no retail operation and a weak investment bank. ABN is the second largest bank in the Benelux region, where Barclays is not represented.

At the results last month, Barclays chief executive John Varley made it clear he was interested in the BRIC countries – Brazil, Russia, India and China. ABN has operations in them all, as well as a solid presence in the fast expanding Far East, built on its Dutch East India Trading Company roots. ABN’s US operation LaSalle Bank would also bring a much-needed retail dimension to Barclays’ fast growing US investment arm. But it’s a big pill to swallow. Barclays is only just the larger of the two, capitalised at £45bn against’s ABN’s £36bn.

If a merger is to be done, it is likely to be an all-share deal with Barclays’ investors taking around 55pc of the £80bn combined group. But, by conceding that it wants to be involved in major cross-border deals, Barclays runs the risk of drawing out Bank of America again. And this time round, it wants to be leading any deal. Barclays may be presenting itself as the “white knight” to help out an embattled ABN, but in essence the talks are nakedly opportunistic.

Barclays shares have more than doubled in the past four years as ABN’s woefully underperformed. A deal would vault it into the premier echelon of global banks, leapfrogging Royal Bank of Scotland and placing it above JP Morgan Chase as the world’s fifth largest.

There is also little doubt that management will remain in Barclays hands. ABN shareholders, agitated by the activist hedge fund TCI, have lost faith in chief executive Rijkman Groenink and want a more highly performing team in charge.

Barclays’ triumvirate of Mr Varley, president Bob Diamond and commercial and retail bank chief Frits Seegers are widely admired. In Mr Seegers, ABN would even see a Dutchman remain in charge of the retail operation. Presented as a merger, a tie-up would really be a de facto takeover.

ABN has backed itself into a corner. TCI’s call for the bank to consider a break-up, sale or merger after six years of “terrible shareholder returns” has found purchase among the shareholder base. Major Dutch pension funds have come out in favour of TCI’s plan and, privately, others are increasingly voicing their dissent. TCI reckons it may speak for up to 40pc of shareholders and ABN’s decision to countenance a merger is a clear indication of investor sentiment.

ABN’s problems have been exposed by its troubled acquisition of Italian bank Antonveneta and the embarrassing defection of its senior investment banking team two years ago to Citigroup. Investment banking continues to shrink slowly and observers reckon Mr Diamond is likely to shut down all but the best performing units in the event of a Barclays merger.

ABN investors will now be hoping for a full-scale bid frenzy. Spain’s largest bank BBVA and France’s BNP are believed to have expressed their interest. SocGen and Santander may also enter the fray. RBS is not interested, and HSBC is too busy fixing its US arm to be a suitor.

Santander’s acquisition of Abbey has proved that cross border deals can work. The Spanish bank has shaken up the sector, revealing that the only real obstacles to pan-European deals remain “egos and politics”, one banker said.

In Unilever, Shell and Corus, there is already a well-tested Anglo-Dutch business relationship.

Given the sensitivities of taking control of a Dutch national icon, though, Barclays will have to play this deal with all the political tact it can muster. and its sister websites,,,,, and are all owned by John Donovan. There is also a Wikipedia article.

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