(July 28 – 12:30 ET) – Mergers are losing appeal among the global banks, which are choosing instead to aim their energies at the booming Internet, The Banker reports in its latest issue.
“In some respects, the past year could be viewed as the calm before the storm. Results have been broadly positive but, while the first major wave of consolidations has taken place, the banks that remain are now being forced to reassess their fundamental strategies amid the weight of new competition, deregulation and globalization,” the British magazine suggests.
In the wake of the first wave of consolidation, it remains to be seen
whether the benfits of hooking up are being realized. Several large banks have had trouble digesting acquisitions, notably Chicago-based Bank One and First Union in Charlotte, N.C. Banks are therefore becoming more careful about getting into deals, the article said, noting Germany’s Dresdner Bank has already seen two possible mergers fall apart this year.
“It is almost impossible for cross-border mergers in Europe to create true shareholder value if they are among equals,” said BSCH co-chairman Emilio Botín. “The opportunities for cost savings exist but are clearly inferior to those available within the same market. It is also clear that the major obstacles represented by different business cultures and different languages are important and greatly magnified. Very strong management is needed to guarantee the success of cross-border mergers.”
In the wake of the mergers Canada no longer has even a single bank ranked among the Top 25 in the world. Japan has nine, the U.S. four, three are from China while France, Germany and Switzerland have two each. Britain, the Netherlands and Spain each have one.
However, size may not be the strategy it once was, a report from the Centre for the Study of Financial Innovation says. “This is a period of extremely high strategic risk for the industry. There is no question that the Internet will result in big winners and losers, and the business models that are currently being developed will weed out the industry in a big way.”
It’s not yet clear which strategies will win in the online banking game, with many in the industry believing the business is still in its infancy. What is clear is that banks must have a strategy that embraces the Internet as a force of change.
-IE Staff