European Finance Undergoes Sweeping Realignment as Banks Confront New Competition

Strategic Insights -

A wave of consolidation and upheaval is sweeping through European finance as big money-center banks like Deutsche Bank A.G. and UBS scramble to carve out positions in the huge American market and address intense new competition within their home markets. The recent $9.7 billion bid by Deutsche Bank for Bankers Trust of New York is merely the most visible sign of this broader upheaval. National banks are feeling the pressure to reinvent themselves as European players with the introduction of the single European currency, the euro, and are seeking to enter more lucrative areas as profit margins in traditional banking decline.

Key Takeaways:

  • The introduction of the single European currency, the euro, is increasing pressure on national banks to reinvent themselves as European players.
  • Deutsche Bank's bid for Bankers Trust is part of a broader wave of consolidation in European finance, with big banks like UBS and ABN-Amro seeking to expand their presence in the American market.
  • European banks and insurers are forming cross-border alliances, such as Commerzbank's 5% stake exchange with Assicurazioni Generali.
  • Most of the big deals have been between banks within individual countries, such as Credito Italiano's acquisition of Unicredito and the merger of Bayerische Vereinsbank and Bayerische Hypobank.
  • ABN Amro has been an aggressive acquirer, buying up smaller banks and brokerage houses across Europe and acquiring Standard Federal Bancorporation for $1.9 billion.
  • French banks are largely off-limits to foreign takeover due to government restrictions, with Credit Lyonnaise being a notable exception.
  • Private banks like Deutsche Bank and Dresdner Bank are essentially prohibited from buying nonprofit cooperatives or state-owned institutions in Germany.

Statistics:

  • Deutsche Bank's bid for Bankers Trust: $9.7 billion[^1]
  • ABN Amro's total assets: $500 billion[^2]
  • Credito Italiano's acquisition of Unicredito: $7 billion[^3]
  • Bayerische Vereinsbank and Bayerische Hypobank merger: created Germany's second-largest bank[^4]
  • ABN Amro's acquisition of Standard Federal Bancorporation: $1.9 billion[^5]
  • Commerzbank's 5% stake exchange with Assicurazioni Generali: provides a new channel for marketing products in Europe and white knight to fend off takeover attempts[^6]

Sources:

  • ^[1]: "Deutsche Bank A.G.'s $9.7 billion bid for Bankers Trust of New York" [The New York Times, October 1999]
  • ^[2]: "ABN Amro's total assets: $500 billion" [The New York Times, October 1999]
  • ^[3]: "Credito Italiano's acquisition of Unicredito: $7 billion" [The New York Times, October 1999]
  • ^[4]: "Bayerische Vereinsbank and Bayerische Hypobank merger: created Germany's second-largest bank" [The New York Times, October 1999]
  • ^[5]: "ABN Amro's acquisition of Standard Federal Bancorporation: $1.9 billion" [The New York Times, October 1999]
  • ^[6]: "Commerzbank's 5% stake exchange with Assicurazioni Generali: provides a new channel for marketing products in Europe and white knight to fend off takeover attempts" [The New York Times, October 1999]
  • ^[7]: "French banks are largely off-limits to foreign takeover" [The New York Times, October 1999]
  • ^[8]: "Private banks like Deutsche Bank and Dresdner Bank are essentially prohibited from buying nonprofit cooperatives or state-owned institutions in Germany" [The New York Times, October 1999]