European banks are flirting with each other again. Here's why

Will some of Europe's biggest banks soon be walking down the aisle?There have long been rumblings that weak pr...

Posted: Jun 8, 2018 3:42 PM
Updated: Jun 8, 2018 3:42 PM

Will some of Europe's biggest banks soon be walking down the aisle?

There have long been rumblings that weak profits and rising costs could spark a wave of bank mergers in Europe, but deals have remained elusive.

Now speculation has been reignited by media reports suggesting that Deutsche Bank could pair off with German rival Commerzbank, while Barclays could join forces in Britain with Standard Chartered.

In a rare cross-border scenario, France's Soci-t- G-n-rale would merge with Italy's UniCredit.

There is no suggestion that any of the banks are close to pulling the trigger on a takeover. Still, the rationale for regional consolidation is compelling and the forces pushing banks together are unlikely to weaken.

The main problem is that Europe has too many banks.

Across the 19 countries that use the euro currency, there are 54,000 citizens per bank branch, according to the European Banking Federation.

That's roughly the same ratio as in the United States, but the banking sector is much leaner in the United Kingdom, where there are 170,000 people per bank, and in Japan, where the number of citizens per bank rises to nearly 900,000.

"You do have a very divided market across the continent of Europe," Barclays CEO Jes Staley said this week during an interview on CNBC. "It's true that scale ... is an asset."

Related: Deutsche Bank CEO is 'sick and tired of bad news'

Then there's the issue of profitability. While American banks are churning out record earnings, their counterparts in Europe have struggled in the wake of the global financial crisis.

Deutsche Bank, which has been losing money for years, had its credit rating downgraded by S&P earlier this month. The lender's new CEO recently announced that he would slash more than 7,000 jobs, focus investment banking on European clients, and do more to control costs.

Barclays has had its financial position degraded by billions in payments made for allegedly deceiving investors about the quality of mortgage deals that fueled the 2008 financial crisis.

According to the European Banking Federation, banks in the eurozone are much worse at using their assets to make a profit, generating returns of only 1.8%, compared to 8.8% in the United States and 7.3% in Japan.

ZEB, a financial services consultancy, said earlier this year that it expects "widespread industry consolidation" between now and 2021, especially in the most fragmented markets such as Germany and Austria.

"A number of efficient large banks will become expert at 'hoovering up' smaller and less efficient banks," ZEB predicted.

Mississippi Coronavirus Cases

Data is updated nightly.

Confirmed Cases: 35419

Reported Deaths: 1230
CountyConfirmedDeaths
Hinds290851
DeSoto190019
Madison144638
Jones120349
Harrison113616
Rankin108715
Neshoba104577
Forrest99343
Lauderdale96381
Scott81915
Jackson77519
Washington72213
Copiah65315
Leake63520
Lee61222
Oktibbeha61128
Grenada5949
Warren59421
Holmes58641
Wayne56218
Yazoo5536
Lowndes54813
Lamar5347
Leflore53156
Lincoln52935
Pike49920
Lafayette4974
Sunflower4778
Monroe45635
Panola4486
Covington4355
Bolivar40518
Simpson3933
Attala38424
Newton37510
Tate35213
Adams35120
Pontotoc3466
Marion32712
Claiborne30111
Chickasaw29719
Winston29511
Pearl River28832
Noxubee2788
Jasper2776
Marshall2773
Walthall2627
Clay25811
Union25211
Smith24612
Clarke22325
Coahoma2226
Lawrence2092
Yalobusha2079
Tallahatchie1954
Kemper18414
Carroll18111
Montgomery1713
Calhoun1645
Humphreys16310
Itawamba1468
Tippah14511
Hancock14413
Webster13411
Jefferson1263
Tunica1233
Jefferson Davis1204
Prentiss1204
George1163
Greene11310
Amite1103
Alcorn1002
Quitman991
Wilkinson989
Tishomingo971
Perry874
Choctaw754
Stone742
Franklin542
Sharkey480
Benton460
Issaquena101
Unassigned00

Alabama Coronavirus Cases

Confirmed Cases: 49892

Reported Deaths: 1077
CountyConfirmedDeaths
Jefferson6433170
Mobile4753139
Montgomery4430112
Tuscaloosa263253
Madison21199
Marshall192611
Shelby164225
Lee157237
Morgan12695
Baldwin120711
Walker106131
Elmore102920
Dallas9969
Etowah95114
DeKalb9417
Franklin93216
Autauga67614
Russell6750
Chambers67427
Unassigned65328
Butler65129
Tallapoosa62869
Limestone6223
Houston5857
Cullman5716
Lauderdale5686
St. Clair5133
Colbert4956
Calhoun4905
Lowndes48122
Escambia4808
Pike4725
Coffee4244
Jackson4182
Covington41412
Barbour3942
Dale3911
Talladega3897
Bullock37710
Marengo35211
Hale34823
Chilton3232
Clarke3126
Wilcox3038
Blount2961
Winston2965
Sumter29113
Marion27514
Pickens2696
Randolph2589
Monroe2553
Perry2362
Conecuh2308
Bibb2211
Macon2159
Choctaw21212
Greene1959
Henry1533
Washington1418
Crenshaw1273
Lawrence1250
Cherokee1237
Geneva960
Lamar871
Clay852
Fayette821
Coosa651
Cleburne421
Out of AL00
Tupelo
Few Clouds
77° wxIcon
Hi: 91° Lo: 71°
Feels Like: 78°
Columbus
Clear
73° wxIcon
Hi: 91° Lo: 72°
Feels Like: 73°
Oxford
Broken Clouds
77° wxIcon
Hi: 89° Lo: 68°
Feels Like: 78°
Starkville
Clear
70° wxIcon
Hi: 90° Lo: 69°
Feels Like: 70°
WTVA Radar
WTVA Temperatures
WTVA Severe Weather