ECB calls for easier banking mergers

100 euro banknotes in Rome, Italy. (Photo: AFP/VNA)

Cross-border mergers between banks in Europe should be as easy as those within the same country, according to European Central Bank (ECB) policymaker Francois Villeroy de Galhau.

Although banking regulation and supervision in the European Union is centralized, banking markets remain limited to national boundaries.

According to Mr. Villeroy, who is also the Governor of the French Central Bank, it is expected, logical and normal for cross-border mergers between banks within the monetary union to take place as simply and smoothly as between banks within the same country.

Current regulations allow mergers, he added, but the surcharges in some host countries imposed on branches are too high.

French President Emmanuel Macron said earlier this month that Europe's banking sector needed more consolidation, even if that meant a major French bank could be taken over by a European rival.

Previously, the recent proposed merger with Banco Bilbao Vizcaya Argentaria, SA (BBVA) with Banco Sabadell SA could give momentum to the transformation of the banking sector in the Eurozone, by placing BBVA in the group of banks with assets of over $1,000 billion and becoming the third largest bank in the region by market value.

BBVA has proposed a merger with Banco Sabadell, a development that has sparked debate about mergers in the European banking sector.

The deal would put BBVA in the group of banks with total assets of over $1 trillion in the eurozone, behind only major banks such as BNP Paribas, Crédit Agricole, Banco Santander SA, Société Générale SA, and Deutsche Bank AG.

In addition, the deal would make BBVA the third largest bank in the region by market capitalization, estimated at nearly $65 billion, behind only BNP Paribas and Banco Santander.

Goldman Sachs analyst Chris Hallam said the basis for the deal was revenue potential and the ability to cut costs, as the two banks' Spanish businesses overlap.

According to 2023 figures, BBVA's revenue and net profit after the merger could increase by 17%, with loans increasing by 40% and risk-weighted assets increasing by 22%.

Despite the promising outlook, Mr. Hallam raised the challenges of mergers between banks in the region, due to the strict legal regime and the complexity of the operation making large-scale mergers less feasible.

Mergers and acquisitions (M&A) activity in the European banking sector has slowed in 2023, falling to its lowest level in at least six years, with the fourth quarter of 2023 being the weakest since before 2018.

However, S&P Global said M&A activity by banks in Europe is expected to accelerate in 2024, thanks to lower inflation and lower deal values, especially in the fintech and consulting sectors.

In January 2024, French bank Crédit Agricole SA bought a 7% stake in Paris-based payments group Worldline SA.

Switzerland's largest bank UBS said its first-quarter net profit jumped 71% to nearly $1.8 billion after two quarters of losses due to its takeover of Credit Suisse. UBS said revenue rose 46% to $12.7 billion in the reporting period.

According to the official announcement, the income of UBS's investment bank - the largest project in the merger with Credit Suisse - increased by 16% thanks to a more favorable market environment, in addition to better initial public offerings (IPOs) and M&A activities.

In March 2023, the Swiss government pushed UBS to carry out a $3.25 billion takeover to prevent Credit Suisse from going bankrupt - which would have had serious consequences for the global financial system. The first three months of 2024 are the time for the bank to look back on the progress since the Credit Suisse merger.

“More than a year ago, we were asked to play a key role in stabilizing the Swiss and global financial system through the acquisition of Credit Suisse and we are delivering on our commitments,” said UBS CEO Sergio Ermotti.

According to him, the results of the first quarter of 2024 marked a recovery in net profit and an increase in the bank's capital accumulation.

These are testaments to the strength of UBS and its clients, as well as UBS's ability to make significant progress on the two banks' integration plans, while actively optimizing their financial resources./.

According to vietnamplus.vn

Source: https://www.vietnamplus.vn/ecb-keu-goi-tao-thuan-loi-cho-hoat-dong-sap-nhap-ngan-hang-post956169.vnp

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