European banks are flirting with each other again. Here's why

Will some of Europe's biggest banks soon be walking down the aisle?There have long been rumblings that weak pr...

Posted: Jun 8, 2018 4:42 PM
Updated: Jun 8, 2018 4:42 PM

Will some of Europe's biggest banks soon be walking down the aisle?

There have long been rumblings that weak profits and rising costs could spark a wave of bank mergers in Europe, but deals have remained elusive.

Now speculation has been reignited by media reports suggesting that Deutsche Bank could pair off with German rival Commerzbank, while Barclays could join forces in Britain with Standard Chartered.

In a rare cross-border scenario, France's Soci-t- G-n-rale would merge with Italy's UniCredit.

There is no suggestion that any of the banks are close to pulling the trigger on a takeover. Still, the rationale for regional consolidation is compelling and the forces pushing banks together are unlikely to weaken.

The main problem is that Europe has too many banks.

Across the 19 countries that use the euro currency, there are 54,000 citizens per bank branch, according to the European Banking Federation.

That's roughly the same ratio as in the United States, but the banking sector is much leaner in the United Kingdom, where there are 170,000 people per bank, and in Japan, where the number of citizens per bank rises to nearly 900,000.

"You do have a very divided market across the continent of Europe," Barclays CEO Jes Staley said this week during an interview on CNBC. "It's true that scale ... is an asset."

Related: Deutsche Bank CEO is 'sick and tired of bad news'

Then there's the issue of profitability. While American banks are churning out record earnings, their counterparts in Europe have struggled in the wake of the global financial crisis.

Deutsche Bank, which has been losing money for years, had its credit rating downgraded by S&P earlier this month. The lender's new CEO recently announced that he would slash more than 7,000 jobs, focus investment banking on European clients, and do more to control costs.

Barclays has had its financial position degraded by billions in payments made for allegedly deceiving investors about the quality of mortgage deals that fueled the 2008 financial crisis.

According to the European Banking Federation, banks in the eurozone are much worse at using their assets to make a profit, generating returns of only 1.8%, compared to 8.8% in the United States and 7.3% in Japan.

ZEB, a financial services consultancy, said earlier this year that it expects "widespread industry consolidation" between now and 2021, especially in the most fragmented markets such as Germany and Austria.

"A number of efficient large banks will become expert at 'hoovering up' smaller and less efficient banks," ZEB predicted.

West Lafayette
Overcast
70° wxIcon
Hi: 85° Lo: 60°
Feels Like: 70°
Kokomo
Scattered Clouds
71° wxIcon
Hi: 83° Lo: 59°
Feels Like: 71°
Rensselaer
Clear
70° wxIcon
Hi: 80° Lo: 54°
Feels Like: 70°
Fowler
Clear
70° wxIcon
Hi: 81° Lo: 57°
Feels Like: 70°
Williamsport
Overcast
68° wxIcon
Hi: 84° Lo: 61°
Feels Like: 68°
Crawfordsville
Overcast
67° wxIcon
Hi: 84° Lo: 63°
Feels Like: 67°
Frankfort
Overcast
68° wxIcon
Hi: 83° Lo: 61°
Feels Like: 68°
Delphi
Overcast
69° wxIcon
Hi: 83° Lo: 57°
Feels Like: 69°
Monticello
Overcast
69° wxIcon
Hi: 82° Lo: 56°
Feels Like: 69°
Logansport
Overcast
70° wxIcon
Hi: 82° Lo: 55°
Feels Like: 70°
Quiet Conditions After Yesterday's Storms.
WLFI Radar
WLFI Temps
WLFI Planner

Indiana Coronavirus Cases

Data is updated nightly.

Confirmed Cases: 74992

Reported Deaths: 3044
CountyConfirmedDeaths
Marion15963725
Lake7632275
Elkhart488385
Allen3937163
St. Joseph354682
Hamilton2803104
Vanderburgh199713
Hendricks1901108
Cass17969
Johnson1767118
Porter133839
Clark124447
Tippecanoe122111
Madison98765
LaPorte92130
Howard90565
Kosciusko86212
Bartholomew80147
Floyd79146
Marshall79022
Monroe75930
Delaware73852
Dubois70012
Noble68429
Boone68346
Hancock67038
Vigo66810
Jackson5885
Warrick58630
LaGrange55910
Shelby55827
Grant52830
Dearborn50828
Morgan48334
Clinton4403
Henry38520
Wayne37710
White37210
Montgomery35421
Lawrence35027
Harrison34123
Decatur33832
Putnam2908
Miami2742
Daviess27320
Scott26810
Greene25134
Jasper2452
Franklin24314
DeKalb2354
Gibson2284
Jennings22612
Steuben2113
Ripley2087
Carroll1932
Fayette1907
Perry18612
Starke1787
Posey1770
Orange17324
Wells1712
Wabash1703
Fulton1692
Jefferson1652
Knox1590
Whitley1546
Tipton14311
Washington1421
Spencer1363
Sullivan1341
Clay1245
Huntington1243
Randolph1234
Newton11810
Adams1022
Jay920
Owen911
Pulaski831
Rush804
Brown741
Fountain742
Blackford652
Ohio655
Benton620
Pike560
Vermillion550
Parke521
Switzerland520
Crawford450
Martin450
Union410
Warren231
Unassigned0206

COVID-19 Important links and resources

As the spread of COVID-19, or as it's more commonly known as the coronavirus continues, this page will serve as your one-stop for the resources you need to stay informed and to keep you and your family safe. CLICK HERE

Closings related to the prevention of the COVID-19 can be found on our Closings page.

Community Events