Round two: mergers?

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Speculation is afoot that the next stage of the credit catastrophe will see banks seeking solace in each other's arms. Not good news for jobs.

DealBook last week quoted Charles Peabody of Portales Partners, a financial analyst with a pedigree from the likes of Merrill Lynch, UBS and "other institutions", as saying Wall St banks will be making "forced marriages" in the coming months.

Portales reportedly thinks that Merrill and Bear Stearns are the most likely to polish their credentials in preparation for the speed dating circuit - Bear's $1bn tie-up with Citic hasn't, it seems, done the business, and Merrill may need to do more than parachute in Laurence Fink.

Peabody lists the likely suitors as JPMorgan Chase, Wachovia and Bank of America.

Meanwhile, Citigroup has the potential to fall apart after its bête noire Meredith Whitney suggested last week that disintegration was the only option left to it. The Telegraph says JPMorgan, HSBC and Morgan Stanley are all eyeing up its bits. And the Financial Times today reports that the candidates for the role of Citi's CEO are being told they'll have the freedom to dismember the group if they feel so inclined.

None of this sounds like particularly great news for the bankers involved, particularly those at JPMorgan who seem to be primed to jump into bed with anyone going. The last round of big bank mergers back in 2000 saw merged entities like Credit Suisse and JPMorgan Chase lay off around 10% of their staff.

Not everyone's convinced that bank mergers are on the cards though. "The only time you're going to see someone selling in an environment like this is in an extremis situation," says Brad Hintz at Sanford Bernstein. "I don't see that yet."

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