City urges bank to do deal

BARCLAYS will remain under pressure to merge, make a major acquisition, or sell up despite chief executive Martin Taylor's efforts to stop speculation about the bank's future, according to City analysts and Barclays' employees.

"When will the speculation end?" one well-placed Barclays employee said last week. "It won't... Not until we do a deal."

"Until Barclays resolves its present situation, it runs the risk of looking foolish," added an analyst at a major City institution. "What will resolve the situation? A deal."

Speaking at the bank's annual results press conference on 17 February, Mr Taylor acknowledged speculation about a Barclays-National Westminster Bank merger. But he poured cold water on it by hinting that such a deal would have to be done by mutual consent even though NatWest has said it was not interested. And he sought to buy time for himself by suggesting Barclays had up to a decade to act.

"Taylor wants Barclays to be in a position to dictate its destiny," said a bank spokeswoman.

Nevertheless, bank analysts say Barclays along with NatWest effectively remains in play. It reported 1997 pre-tax profits of pounds 1.72bn, down 26 per cent from a year earlier, largely as a result of the costs of disposing of its BZW equity and corporate advisory operations.

"Barclays has a sound franchise," said Salomon Smith Barney bank analyst John Leonard. "I don't think the merger speculation has affected its businesses."

Last week Barclays became entangled in yet another round of speculation after it was reported that Mr Taylor and Standard Chartered chief executive Malcolm Williamson had dined at Chez Nico on Park Lane. The two banks only punctured merger speculation by issuing separate disavowals.

By the end of last week, however, the rumour mill was cranking up again. One analyst suggested Barclays might link up with Germany's Deutsche Bank, which is in the process of trimming 10 per cent of its 76,000 global workforce.

Another suggested Barclays might buy Credit Lyonnais, despite the fact that in an interview with Figaro last week, Lloyds TSB chairman Brian Pittman said he might be interested in the troubled French giant.

A third analyst concluded: "Taylor just about retains the benefit of the doubt in the City. But people are beginning to look at him with a degree of scepticism. I think we might end up where we started with all the speculation - with Barclays and NatWest merging. First, though, Taylor has got to get NatWest talking."