British banks should stop fretting about Brexit

British banks should be bolder and go looking for new opportunities in Europe, says Matthew Lynn.


British banks should be bolder and go looking for new opportunities in Europe.

Deutsche Bank is having to merge to survive. Scandinavian banks Danske and Swedbank have been rocked by money-laundering scandals. Shares in France's Societe Generale have almost halved in the last year and BNP Paribas has not done much better. Italy's UniCredit limps from crisis to crisis. We have heard a lot in the last few years about how much trouble British banks will be in after Brexit takes place. Maybe they will be, if we ever get around to leaving. But right now it is banks across the continent that seem to be in bigger trouble.

Subscribe to MoneyWeek

Become a smarter, better informed investor with MoneyWeek.

British banks are in good shape

And yet they are all relatively weak in Europe. HSBC operates in France following its 2000 acquisition of Credit Commercial de France, and has about 800 branches across the country. But apart from a few units in places such as Gibraltar and Malta, and also in Switzerland, that is about it. None of the British banks has a major presence in any of the continental markets. That is surely a weakness. For all its troubles, Europe remains one of the largest economic regions in the world and one of the wealthiest. With its ageing populations, and cosy markets with relatively little competition, and not much in the way of innovation, there should be plenty of scope for revitalising troubled lenders. UK banks could do well in many of those markets.

Why not launch a bid for one of the continent's troubled lenders? After all, for all its problems in the last decade Deutsche Bank is still massively strong in its home market, with a leading position as lender to Germany's small and medium-sized companies. If that is not a potentially lucrative banking market it is hard to know what is. Danske and Swedbank are both strong in their domestic economies, and Scandinavia remains one of the most robust economic regions in the world, and one where British companies have traditionally felt at home. The French economy is going through a rough patch, but President Macron's reforms may eventually bear some fruit. And the Italian banks may not be in as bad shape as they appear on the surface.

Advertisement - Article continues below

Time to rediscover the takeover

Banking acquisitions don't have to be a catastrophe. Done right, they can prove a huge strategic success and deliver great returns to shareholders. There are big opportunities in Europe right now.

Our banks should be bolder, and start to move more aggressively into the rest of the continent. Instead of fretting all the time about how Brexit might affect their business they should expand across Europe. HSBC buying Deutsche and Barclays buying Swedbank would put those banks in a far stronger position and the City, too.




The currencies to bet on this year

The US dollar could be set to weaken this year, while the euro, Canadian dollar and the Swiss franc could be good bets for optimistic traders.
17 Jan 2020

How long can the good times roll?

Despite all the doom and gloom that has dominated our headlines for most of 2019, Britain and most of the rest of the developing world is currently en…
19 Dec 2019
Stock markets

The British equity market is shrinking

British startups are abandoning public stockmarkets and turning to deep-pocketed Silicon Valley venture capitalists for their investment needs.
8 Nov 2019

Another Brexit delay – so what happens now?

Last week’s excitement over a Brexit deal getting done proved to be premature. John Stepek looks at where we are now, and what it means for your money…
21 Oct 2019

Most Popular


Currency Corner: how is the New Zealand dollar doing against its US counterpart?

The New Zealand dollar has been doing well against the US dollar in recent months, but has started to wobble a little. Is it still a buy? Dominic Fris…
20 Jan 2020
Share tips

India’s small and mid-cap stocks are set for big gains – here are three to buy now

Each week, a professional investor tells us where he’d put his money. This week: David Cornell of the India Capital Growth Fund highlights three favou…
20 Jan 2020
Share tips

Class acts going cheap: buy into Europe’s best bargains

Value investing appears to be making a comeback, while shares on this side of the Atlantic are more appealing on metrics such as price/earnings ratios…
16 Jan 2020
Share tips

Share tips of the week

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
17 Jan 2020