Barclays / Wells Fargo: breaking banking barriers

11th January 2005
By IB Staff Writer

Speculation is mounting that Barclays and Wells Fargo are to merge.

Recent press reports suggest that UK bank Barclays [BARC.L] and US-based Wells Fargo [WFC] are in merger talks. A tie-up between the two would create the world's fourth largest bank, however many observers believe that a deal remains unlikely. Nonetheless, it cannot be denied that we are entering a new era of international banking.

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Recent months have seen much conjecture regarding the future of leading UK bank Barclays. In the second half of 2004, rumors abounded that US banks Bank of America and Citigroup were to put in a bid for the UK player. Now it appears that a third US player has entered the fray.

According to recent press reports, the US's fourth largest bank by assets and market capitalization, Wells Fargo, has been in merger talks with Barclays. The reports suggest that the two players were in talks before Christmas and that discussions are set to resume in the coming weeks.

If the two banks were to join forces, it would be an interesting, if surprising, tie-up and would see the creation of the world's fourth largest bank behind Citigroup, HSBC and JP Morgan. Furthermore, it would substantially improve the geographic reach of both banks, giving Barclays access to the US retail market and US-centric Wells Fargo an entry route into Europe.

The early view of most industry observers is that such a tie-up is nevertheless unlikely to happen, with many analysts pointing out that there is little overlap between the two banks' operations. Such a move would certainly signal a significant change in direction for Barclays' international retail banking strategy, which has previously focused on expansion in western Europe and Africa. As such this raises questions as to whether the merger would in fact be a vehicle aimed at enabling Wells Fargo to enter the European market.

Whether a merger between Barclays and Wells Fargo happens or not, there is a clear trend emerging of banks looking across international borders for deals. North American banks are interested in Europe, two European banks (Santander and Danske Bank) have recently made purchases in the UK and Ireland, while UK banks are looking to Australia and South Africa. It increasingly seems the borders of international banking are slowly being broken down.
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