Barclays eyes acquisition of Spanish bank

Barclays is believed to be in talks to buy Spain's eighth-largest bank, Banco Zaragozano, in a move that would help it establish a bridgehead in one of Europe's most buoyant banking markets.

Negotiations are at an early stage, according to reports yesterday, and no details were available of any possible offer for the bank, which has a market value of €1.1bn. Other foreign banks, including the Netherland's ING Groep, may also be in the running, banking sources said.

Both Barclays and ING declined to comment. An official at Banco Zaragozano denied that a deal with Barclays was at hand.

Barclays, the UK's fourth-largest bank, has been looking for acquisition opportunities on the Continent but its chief executive Matthew Barrett has poured cold water on the possibility of a big merger in the near future.

Barclays has a handful of branches in Spain and has been particularly targetting the local mortgage market, which has been growing by more than 15 per cent a year in recent years. Zaragozano is strongest in the affluent Aragon region in north-eastern Spain.Hugh Pye, at BNP Paribas, said a deal would be a good strategic fit with Barclay's wealth management unit. "Acquiring Zaragozano would be a means for Barclays to expand its upmarket wealth management brand into the mass market area," he said.

But other analysts cautioned that any new entrants faced a struggle to gain share of a market dominated by Spain's two leading private banks, Santander Central Hispano and BBVA, as well as the big savings banks La Caixa and Caja Madrid.

Zaragozano's shares, which have climbed 30 per cent this year on takeover speculation, rose 59 cents to €12.30. The bank posted a net profit last year of €48.86m, leaving the bank valued at about 20 times earnings, compared with about 14 for European banks on average. Barclays shares closed down 6.5p at 606p.