LONDON -- Analysts at Merrill Lynch think Bank of America could be about to make a bid for U.K. retail and investment banking group Barclays PLC, in a deal that would create the world's biggest bank.
Barclays's market cap currently stands at more than $90 billion, while Bank of America's is more than $200 billion.
A deal would complement Bank of America's interest in expanding internationally, particularly in corporate and investment banking. It would also be the largest financial industry merger ever and would rank among the top three or four deals of any kind. Barclays has a market capitalization of about $90 billion, and Merrill Lynch said Bank of America could pay up to about $117 billion and still have the deal add to its earnings in 2008.
"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 note to clients. "A deal could be announced near-term," the wrote.
A takeover would see Bank of America convincingly outstrip Citigroup Inc. to become the biggest bank in the world by market value. The two banks have jostled for market-value leadership this year. Bank of America wants to build top-tier positions in businesses such as global treasury management, global asset management and global fixed-income underwriting and trading, said Merrill Lynch.
Barclays, the U.K's third-largest bank by market capitalization, would give Bank of America a significant international presence in each of these markets, as well as a major U.K. retail and commercial bank and the U.K.'s biggest credit-card business.