At some point as it passes from basket case into full financial recovery, UBS is bound to look attractive as a bid target or merger partner.

Switzerland's largest bank and the world's biggest player in wealth management took a further step towards rejuvenation today as it sold off $15 billion of its toxic American mortgage assets to BlackRock, the US money manager.

The sale cuts UBS's exposure to dodgy American home loans in half, although it could still lose billions on student loans, property and notes referenced on US securities.

There has been a parting of the ways with top management, including the chairman and chief executive, lessons have been learned on risk-taking and thousands of staff are heading towards the job centre.

So is now UBS's time?

Suggestions yesterday that Barclays had cast an eye over UBS as part of a grand plan to play the M&A game and repair its balance sheet were dismissed by sources close to the UK bank.

But in the City there appears to be a genuine undercurrent of excitement at the prospect of a Barclays UBS combination - and not only among fee-hungry corporate financiers.

Combining UBS's wealth management, investment management and private client operations with Barclays would create a clear market leader in each area but would probably not unsettle competition regulators.

There are similarities in fixed income, which both firms understand, and UBS can perform in cash equities and big chunks of investment banking, particularly corporate finance.

Each other's retail banking branch networks could be left largely untouched, although obvious benefits of scale would emerge.

The cost of financing a deal would be massive for Barclays - UBS has a market value that tops £35 billion and would expect a healthy premium.

Crucially, management are not sellers - pretty much a prerequisite in bank M&A. And, given the ABN Amro experience, it's not clear that investors would fall in.

Still, it is the stuff investment banking dreams are made of.

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