National Champions of the ECM 2008
A look around the top investment banking players in Europe in the current climate quickly confirms the difficulties most have faced since the middle of 2007. An analysis of the individual performance of those banks is inevitably a kind of referendum on their performance in the face of the credit crunch, although they do not operate on a level playing field, and the impact the crisis has had has been determined – at least to some extent – by the country in which the bank operates.
An air of optimism pervades the UK, despite its housing market being among the sickest in Europe. British banks remain focused on their strategies and convinced the crisis will offer opportunity to expand existing business lines. Barclays and RBS have been resolute in their determination to expand their global reach, while Lloyds TSB has focused on the UK middle market, making a virtue of its conservatism while continuing to expand its suite of products.
But in Spain, also close to the epicentre of the housing boom underlying the credit crunch, the banks have been hit hard. Growth has slowed sharply and banks are playing a defensive game, hoping to wait out problems like a spike in non-performing loans.
In France, two institutions dominate, with one – SG – kicking the year off by grabbing unwanted headlines after the emergence of a €4.9bn trading scandal. Yet the widely-expected acquisition of the bank never materialised, leaving it to get back to the business of trying to close the gap on its larger rival, BNP Paribas. BNP is one of only two major investment banks not to post a loss since the onset of the crisis (the other is Goldman Sachs) and both French banks have identified international expansion and cross-selling as strategies for growth.
In Switzerland, too, two banking giants have seen a dramatic disparity in performance, though this has been driven purely by investment decisions, not by fraud – with the added drama that performance confounded conventional wisdom regarding which institution could best be described as conservative. Yet the mood at both is upbeat.
Germany is dominated by an even smaller club – especially since Deutsche saw potential competition from Dresdner melt away thanks to the latter’s takeover by Commerzbank. Commerz plans to retreat from the businesses in which it competes with its larger rival. Yet Deutsche has earned its success: it saw the writing on the US housing-market wall early and positioned itself accordingly.
If there is a financial hole in the ground, Italy will find a way to fall into it: the country is teetering on the brink of its forth recession in a decade. The markets have been hit by the illiquidity epidemic, with securitisation, equities and leverage finance the worst hit. Italian banks are increasingly turning to foreign shores to keep their heads above water.
In Benelux the impact was felt keenly, partly because the financial sector looms relatively large in otherwise small economies. But, unlike in Italy, a robust domestic scene has provided some comfort to the banks. The Nordic region, on the other hand, has been shielded from the excesses of the crisis by virtue of being relatively small.
The feeling of optimism is probably most acute in Russia: the impact of the credit crunch has been felt, but bankers have refused admit defeat, preferring to wait eagerly for their economy to return to form.