“It’s the largest transaction ever in the history of the global financial services industry.” So said John Varley yesterday as he announced details of the €140 billion (£95 billion) merger proposal that he had just pulled off.

The chief executive of Barclays was quick to add that the objective for merging with ABN Amro was not size for size’s sake, but to accelerate Barclays’ existing strategic journey. Nevertheless, it is the scale and reach of the combined bank that was emphasised repeatedly in the joint announcement from the banks, which would create the No 5 bank in the world and catapult it above Royal Bank of Scotland in the rankings.

A combined bank would have 47 million customers with one of the best transaction banking platforms. It would be a top five issuer of credit cards outside the United States and the largest institutional asset manager. It would be the fifth-biggest investment bank and the eighth-biggest wealth manager.

However, although size may massage bank egos and help to justify bigger pay packets, it was the scope for profit-boosting synergies that the City wanted to hear about, and here Barclays asserted that there were great opportunities, both through cost savings and revenue enhancements.

Redundancies and other savings would reduce the costs bill by €2.8 billion, the banks said, equivalent to 9 per cent of the joint costs base. Cross-selling of products would boost the revenue line by €700 million a year — 0.3 per cent of joint revenues.

The deal would be immediately earnings-enhancing for ABN shareholders and would boost profits per share for Barclays shareholders, too — by 5 per cent in 2010. Sweetening the deal was the promise of a €12 billion return of cash to shareholders via share buybacks, financed by the $21 billion (£10.5 billion) sale of LaSalle, ABN’s American banking unit.

In senior personnel terms, the merger is more of a Barclays takeover. Mr Varley will be chief executive of the combined group. Bob Diamond, who runs Barclays’ investment banking division, will head the combined investment banking and investment management division and will also gain the title of president.

Frits Seegers, who runs the retail side of Barclays, takes on the other division in the combined operation, global retail and commercial banking.

Chris Lucas, the new finance director of Barclays, who is only a few weeks into the job, takes the combined finance director role. There is also a place on the planned group executive committee for Paul Idzik, the chief operating officer of Barclays, who retains the same title. Even at chairman level, Barclays will soon call the shots. Arthur Martinez, the ABN chairman, will, at an unspecified date, step down to make way for Marcus Agius, the Barclays chairman, who initially will take the role of deputy chairman.

A U-turn on regulatory expectations means that the UK’s Financial Services Authority takes the lead role in supervising the joint operation. Barclays had expected the Dutch central bank DNB to take that role.

However, the headquarters of the combined bank — to be called Barclays — will still be in Amsterdam, as originally envisaged. Mr Varley, who plans to move to the Dutch city, insisted that there was still some commercial logic to basing the headquarters there and denied that it was merely a sop to Dutch sensibilities. “Don’t just think this is form over substance,” he said. “I need to immerse myself in the business of ABN.”

The combined bank will report its results and set its dividend in euros, giving Barclays’ UK-based shareholders exposure to the euro/ sterling exchange rate for the first time. Although shareholders applauded the size of the synergies that Barclays hopes can be squeezed from the merger, there were still doubts about its ability to do so without experiencing client defections and revenue losses. There were also concerns that Barclays may have given too much away as it was forced to pay a premium to take control from the ABN management.

Mr Varley conceded that the bank’s record in integrating the Woolwich was not impressive, but noted that lessons had been learnt from that deal.

Alex Potter, of Collins Stewart, said: “This deal is a sensible one. Barclays should produce a return on investment above its cost of capital, but only in 2010, we estimate, and this is a transformational deal for the bank. However, we still believe that there are better owners of the ABN portfolio. The Royal Bank of Scotland consortium can present more compelling logic and greater synergies, in our view.”

Dresdner Kleinwort was sceptical that the synergies could be achieved and called the merger “the wrong deal at the wrong price”. Bear Stearns said that the LaSalle deal “complicates matters” but expected the RBS consortium to return.

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