Monday, December 11, 2006

Bank of America & Barclays: may be Bad News

Guess, Bank of America got a lot of press for passing Citigroup as the world's largest bank based on market cap. Now, it wants to take Citi route : build a presence overseas and expand outside core franchises. While the market is calling to break Citi apart, B of A may be looking at buying British bank Barclays.

Barclays has a market value of $90 billion and Bank of America is over $200 billion. Merrill Lynch believes that even if B of A pays over $100 billion, the purchae could add to earnings next year. Maybe.

Getting into investment and corporate banking is a dicey proposition, especially outside the US. If the market in private equity does not hold or if M&A activity slows or its the world's stock markets meet the laws of gravity, $100 billion could be a lot to pay.

Take a lesson from Citi. Stick to what you do well. Don't get too big and complex.

No comments: