Banking giant Barclays has confirmed that it is in exclusive talks with Dutch bank ABN Amro about a potential £80 billion merger.
The bank issued a statement to confirm discussions were taking place with ABN Amro but stressed that they were still only at an early stage.
The statement said: "Further to its announcement this morning, Barclays PLC confirms that it is in exclusive preliminary discussions with ABN Amro concerning a potential combination of the two organisations which will create value for both sets of shareholders.
"These discussions are the result of careful consideration to create a highly complementary partnership. The talks are at an early and exploratory stage and there can be no certainty that they will lead to a transaction.
"A further announcement will be made in due course."
If agreed, the tie-up would create a bank with 47 million customers and more than 220,000 staff worldwide.
It would help Barclays overtake Royal Bank of Scotland to become the UK's second largest bank and create a rival to the world's two largest banks, Citigroup and HSBC.
Barclays' shares dropped nearly 1% as some analysts expressed doubts about how much it might be forced to pay for its Dutch counterpart.
Panmure Gordon banking analyst Sandy Chen said: "Although we do think cost efficiency improvements could drive value creation in a merged group, a bid-fuelled jump in ABN's share price could sap the potential."
ABN Amro, which is listed on the Amsterdam stock exchange, saw its share price soar more than than 9% on news of the potential merger, valuing the firm at more than £39.6 billion.
