Lloyd's CEO sees more bank M&A likely

LONDON (Reuters) - Banks are likely to pursue cross-border acquisitions as opportunities arise to pick up underperforming rivals or to make up for slower economic growth, the head of Lloyds TSB (LLOY.L) said on Tuesday.

Out of the top 20 European banks in 1997, seven have been bought and six have made transformational acquisitions, he said.

"I believe that cross border consolidation will continue as banks strive to create value for their shareholders," Lloyds TSB Chief Executive Eric Daniels said in a speech.

"Short-term consolidation may be opportunistic as some banks are more adversely affected by (current market) dislocation than others. Also as banks struggle to generate revenue growth in a slower economic environment some will consider consolidation," he told the British Bankers' Association annual conference.

Daniels said banks are likely to consider domestic deals as well as cross-border acquisitions.

Lloyds itself retrenched after buying life insurer Scottish Widows at the peak of the equity bull market in 2000, but has since hinted it could return to the acquisition trail.

Lloyds has been named as a potential buyer for battered mortgage banks including Alliance & Leicester ALLL.L and Bradford & Bingley BB.L, which have seen their market value badly eroded by recent turbulence. Daniels, however, made no comments on Lloyds' own acquisition plans.

Barclays (BARC.L) Chief Executive John Varley, who also addressed the banking industry conference, said his bank remained "underweight" in the key U.S. and Asian markets, but stopped short of saying whether a deal could be on the agenda.

Outlining key areas for banks, Daniels said lower liquidity was already impacting lending growth and warned the gap between the interbank cost of borrowing and the official interest rate would not return to pre-credit crunch levels.