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.
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.
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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.
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.
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Matthew Lynn is a columnist for Bloomberg, and writes weekly commentary syndicated in papers such as the Daily Telegraph, Die Welt, the Sydney Morning Herald, the South China Morning Post and the Miami Herald. He is also an associate editor of Spectator Business, and a regular contributor to The Spectator. Before that, he worked for the business section of the Sunday Times for ten years.
He has written books on finance and financial topics, including Bust: Greece, The Euro and The Sovereign Debt Crisis and The Long Depression: The Slump of 2008 to 2031. Matthew is also the author of the Death Force series of military thrillers and the founder of Lume Books, an independent publisher.
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