Shares of Barclays surged for a second day as speculation mounted that Bank of America could buy it, with a leading analyst saying there would be strong merit to a deal.
"We believe Bank of America is very interested in acquiring Barclays," Merrill Lynch said in a research note. "Bank of America has previously indicated that the next stage of its expansion is to become a leading global commercial and investment bank," it added, saying buying Barclays would help it achieve that goal.
Barclays, which has a market value of over $90 billion, declined to comment, but its Chairman Matt Barrett sold 2.3 million shares on Thursday, indicating no approach has been made.
Over 50 million shares of Barclays have changed hands in London action after 84 million shares traded on Thursday, more than three times the daily average.
Barclays would give Bank of America a large international presence in fixed income-oriented investment banking, the leading UK credit card business to merge with its own British cards unit, a big UK retail and commercial bank with efficiency improvement opportunities and the leading global indexed asset management and exchange-traded funds business, the note said.
Barclays shares trade at just under 10 times next year's expected earnings, compared with about 11 times for the European sector, according to Reuters data.
Merrill estimated Bank of America "could pay a 25-30% premium for Barclays and still make the deal modestly cash EPS accretive after merger synergies are fully achieved".
Bank of America Chief Executive Kenneth Lewis has said Europe may offer the best value for growth outside the United States, but has also been reported as saying he wasn't planning any more takeovers and declined to comment on rumors that Barclays was a target.
Dealers said there was also speculation that Spain's BBVA was casting an eye toward the UK bank.