A Merrill Lynch analyst has written a report suggesting its structured products business to be a good reason for Bank of America to seriously consider buying Barclays, as the banking rumour mill has been suggesting.Britain’s third-largest bank saw its shares increase by 5% as the news of BofA’s interest broke last Friday.
"Barclays would give Bank of America the following: a large international presence in fixed income-oriented investment banking including corporate and high yield debt, structured products, derivatives, syndicated lending and treasury management services; the leading UK credit card business; large UK retail and commercial bank; and the leading global indexed asset management and ETF business," said a recent Merrill Lynch report.
Early last week, the bank was said to be a target by BBVA, which is also known to be actively exploring means of expanding its derivatives and structured products business. All banks have so far refused to comment.
However, Merrill's report suggests a deal with BofA might be ‘imminent’. The bank has almost reached its regulatory capacity of 10% of US deposits, and therefore has to look beyond the US and at non deposit-based national businesses in its quest for expansion.
"Bank of America has previously indicated that the next phase of its expansion is to become a leading global commercial and investment bank. In order to achieve that goal, we believe Bank of America is very interested in acquiring Barclays," the Merrill analysts wrote in a research note to clients. "A deal could be announced near term."
