Michael O'Neill, hired two months ago to become chief executive of Barclays PLC, bowed out Tuesday for health reasons before starting on the job.

The move forced one of the United Kingdom's largest banking companies to resume its search for a chief executive.

Mr. O'Neill, a former vice president of BankAmerica Corp., was appointed Feb. 11 to succeed Martin Taylor, who left in November.

Mr. O'Neill's departure left questions about Barclays' strategic initiatives and reignited a round of merger speculation. Barclays' shares surged 2.5% Tuesday.

Mr. O'Neill, 53, resigned after Barclays' doctors confirmed Monday that he had a heart condition that would make him unable to hold a stressful position. U.S. doctors discovered the condition after Mr. O'Neill suffered a blackout in early April while recuperating from a bout of influenza.

"This is very sad," said Paul Barber, director of communications of Barclays' retail division. "After a worldwide search, he was our first choice."

Mr. O'Neill "had vast experience in international banking, had worked in major banking corporations all over the world," Mr. Barber said. "He had a good understanding of Barclays. But most importantly he was passionate about taking this position. The saddest part of this story is that this was his dream job, and now he can't fulfill it."

Described as the consummate "fix-it man," Mr. O'Neill was a vice president of BankAmerica, where he quickly resolved BankAmerica's troubled relationship with languishing hedge fund D.E. Shaw. Before BankAmerica merged with NationsBank Corp., he was chief financial officer. Before that he was chief financial officer of Continental Bank Corp. until it was acquired by BankAmerica in 1994.

"O'Neill was the guy who cleaned up the D.E. Shaw mess," said Raphael Soifer, a bank analyst at Brown Brothers, Harriman & Co. "He also helped rebuild Continental Bank. He's a solid citizen and improvement guy. That's why Barclays wanted him."

Merger rumors took off shortly after Barclays announced Mr. O'Neill's resignation. Potential acquirers are said to be Royal Bank of Scotland, Lloyd's-U.K.'s largest bank-and Halifax PLC, a big home lender.

This is not the first time Barclays has been a subject of merger talk. Last November, after the company's chief executive resigned and the company was reeling from its exposure to Russia, shares of the bank rose on a flurry of rumors.

But many market experts dismissed the speculation, citing Barclays' size and strong business operations, and the United Kingdom's antitrust laws.

The company had a record year in profits, despite the hit to the company's investment banking last year, Mr. Soifer said.

"Lloyd's has made it clear that they won't let anybody buy Barclays except for them, but I doubt it will happen because it would create an antitrust issue," Mr. Soifer said. "Halifax also is looking to make an acquisition because they have too much capital, but I don't see a bank- thrift combination working."

Analysts said they are more concerned about Barclays' strategy.

Mr. O'Neill was expected to shape up the company's investment banking division, Barclays Capital. A new finance director also must be selected, because current director Oliver Stocken plans to retire.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.