Banking On U.S. Acquisitions

With growth stymied at home, European financial institutions are targeting U.S. retail acquisitions.

One other lesson European banks may have learned is that many in the United States are indifferent to whether a suitor is foreign. “I don’t think it’s an issue,” says Grigsby, who has no problems cutting deals, and considers the mergers mainly an injection of European capital. And indeed, these latest bank acquisitions by Europeans appear to be getting better reviews from corporate clients.

Some Caveats

Still, there is bound to be resistance from some quarters of the U.S. banking industry, perhaps led by FleetBoston. And some defensive mergers could result, although not everyone agrees on that scenario. “I don’t think we’re going to see a lot of [mergers just] because a few European banks have come in and decided to make some acquisitions,” says Lawrence White, an economics professor at New York University’s Stern School of Business.

For one thing, few domestic buyers seem willing or able to do large deals right now. Citigroup did complete a $5.8 billion acquisition of Golden State Bancorp in November. But the last large U.S. retail-banking merger before that involved Charlotte, North Carolina-based Wachovia and First Union, in 2001.

A worsening U.S. economy, of course, could dampen all bank-merger activity here. Analysts say the low price HSBC paid for Household reflected fears of a “double-dip” recession, and there are still questions of “how the economy will affect Household’s subprime lending business,” says Joel Gomberg, an analyst at Chicago-based William Blair & Co.

In addition, if consolidation were to pick up in Europe, banks there could lose interest in U.S. acquisitions. BNP Paribas appears to have struck out in last year’s bid for French rival Credit Lyonnais, but it is frequently linked with Société Générale. And BancWest’s Grigsby admits that his parent firm’s spending plans could be curtailed if a large-scale French consolidation had to be funded.

The prospect hasn’t stopped him from scouting potential U.S. targets, though. “Our history has shown us to be quite opportunistic,” says Grigsby, and the very growth of BancWest so far has allowed him to think about more and larger targets.

Ian Rowley is a staff writer at CFO Europe.

From Across the Pond

Large financial-services acquisitions by European companies.

* Announced.
1 Investment in operations.
2 Increase in stake from 45% to 100%.

Source: Dealogic

Acquirer (Country) Target Company Target’s Business
Value ($ millions)
Date*
HSBC Holdings (UK) Household International Consumer financial services
15,467
11/02
Royal Bank of Scotland Medford Bancorp Bank holding company
279
6/02
Deutsche Bank RREEF Real estate investment advisor
490
3/02
BNP Paribas (France) United California Bank Commercial banking
2,400
12/01
Credit Suisse Arch Capital1 M&A investing
500
10/01
Deutsche Bank Zurich Scudder Investment management
2,500
9/01
Swiss Re Lincoln Re Reinsurance
2,000
7/01
BNP Paribas BancWest Bank holding company
2,3992
5/01

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