Belgium: CERA, Kredietbank, and ABB Insurances merged into KBC in 1998. In 1999, ASLK and Generale Bank combined to form Fortis Bank, which was later acquired by BNP Paribas during the financial crisis.
Netherlands: ABN and AMRO merged in 1991, forming ABN AMRO, while ING was created in the same year through the merger of Nationale-Nederlanden and the NMB Postbank Groep.
France: BNP and Paribas merged in 1999 to form the BNP Paribas Group, while Crédit Agricole acquired Banque Indosuez in 1996.
Germany: Deutsche Bank acquired Bankers Trust in 1998, creating one of the world’s largest banks. That same year, Bayerische Vereinsbank and Bayerische Hypotheken-und Wechsel-Bank merged to form HVB Bank.
Switzerland: Union Bank of Switzerland and Swiss Bank Corporation merged in 1997 to create UBS.
UK: Lloyds Bank and TSB merged in 1995 to form Lloyds TSB.
These consolidations were primarily driven by the need for scale, spurred by the introduction of the EU Single Market in 1993, the establishment of the EMU in 1999, and the euro’s introduction in 2002.
However, the first two decades of this millennium have seen significantly less M&A activity in Europe. While experts have long predicted a second wave of consolidation, this time cross-border, forming large international financial institutions, this wave has largely failed to materialize. Some domestic mergers continued to happen, primarily in Southern Europe:
Italy:
In 2017, Banco BPM was formed through the merger of Banco Popolare and Banca Popolare di Milano.
In 2020, Intesa Sanpaolo acquired UBI Banca, then Italy’s fifth-largest bank.
In 2022, BPER completed the acquisition of CARIGE, creating Italy’s fourth-largest bank by assets.
In 2023, Unipol Gruppo, Italy’s second-largest insurer, doubled its stake in Popolare di Sondrio.
Spain:
In 2024, a potential merger between BBVA and Banco Sabadell could create one of Western Europe’s ten largest banks, though this remains uncertain.
In 2020, CaixaBank and state-owned Bankia merged, becoming Spain’s leading domestic bank.
Other significant mergers include Santander’s acquisition of Banco Popular in 2017, CaixaBank’s acquisition of BPI in 2017, Banco de Sabadell’s acquisition of TSB Banking Group in 2015 and the merger of BBK, Kutxa and Vital, three Basque financial institutions, in 2012 to form Kutxabank, among others.
Greece and Cyprus:
In 2024, Greece’s Eurobank acquired stakes in Cyprus’s Hellenic Bank.
Previous mergers include Bank of Cyprus acquiring Cyprus Popular Bank in 2013, and Alpha Bank acquiring Emporiki Bank. Piraeus Bank has also been active, acquiring several smaller banks (e.g. ETBA bank, Agriculutural Bank, Geniki Bank, Hellenic Bank…) over recent years.
These consolidations have mostly been domestic, driven by the need to stabilize financial institutions after the financial crisis. While some mergers were direct responses to the crisis, like BNP Paribas’s acquisition of Fortis Bank, the overall impact was to slow the consolidation process, as governments and regulators imposed stricter risk requirements. Banks were thus compelled to focus on strengthening their balance sheets rather than pursuing M&A.
Due to this slowdown in M&A activity, European Tier-1 banks have become significantly smaller compared to their US and Asian counterparts. While retail banking remains largely domestic, meaning the smaller scale of European banks does not disadvantage them too much, wholesale banking is increasingly international. This puts European banks (excluding UK banks) at a significant disadvantage. US banks, having recovered more quickly from the financial crisis, have aggressively gained market share in corporate and investment banking, now holding around 50% of the global market share in this segment.
Some key figures highlight the disparities:
There are only two truly pan-European banks: BNP Paribas, active in France, Italy, and Benelux; and UniCredit, active in Italy, Germany, and Austria.
The largest US bank’s operating income is approximately three times higher than that of the largest EU bank.
The combined market capitalization of Europe’s five largest banks (BNP Paribas, Credit Agricole, Santander, Société Générale, and Deutsche Bank) is smaller than that of JPMorgan Chase alone.
The market capitalisation of the top five European banks is about one-third of that of the top five North American and the top five APAC banks.
The average return on equity (ROE) for European banks remains below 8%, trailing behind industry expectations and US rivals with ROEs of 10% or higher.
Europe still hosts over 4,500 active banks, many of which are small and medium-sized institutions. The ECB, the EU Commission, and more recently, French President Emmanuel Macron, have all advocated for mergers, particularly cross-border ones, to diversify risks, integrate financial markets, reduce overcapacity, increase profitability, and enable European banks to compete more effectively on a global scale.
Despite the potential benefits, several significant hurdles must be overcome to realize a new wave of cross-border consolidation:
National sentiment and the role of banks as symbols of national pride.
Fragmented banking regulations, including differences in tax, accounting, bankruptcy, loan and deposit consumer protection rules, and collateral treatment.
The absence of a unified European capital market.
The stalled development of a European Deposit Insurance Scheme (EDIS), complicating cross-border liquidity and capital movements.
The complexity of integrating IT systems across countries, often leading to significant delays or cost overruns.
Increased regulatory burdens as banks grow in systemic importance, potentially creating "Too Big to Fail" entities requiring additional capital requirements from the Financial Stability Board.
These constraints make achieving cross-border synergies challenging, leading to insufficient added value for scaling banks across borders.
Despite the challenges, rumors and speculations of potential mergers have circulated for years:
Deutsche Bank has been linked with possible takeovers of ABN AMRO and Commerzbank.
UniCredit has been rumored to be in merger discussions with Société Générale and was also involved in talks with the Italian government to acquire Banca Monte dei Paschi (BMPS).
Barclays has been speculated to explore mergers with Standard Chartered and Santander.
BNP Paribas has been linked to potential mergers with giants like Santander or Société Générale.
Nordea made an unsuccessful bid to acquire ABN AMRO, which was rejected by the Dutch government.
When looking at the top 50 banks in Europe, we see following geographical spread:
6 in UK, of which 3 in top 10
6 in France, of which 4 in top 10
5 in Germany, of which 1 in top 10
5 in Spain, of which 1 in top 10
5 in Italy, of which 1 in top 10
So as seen in the list of rumours and speculations, a major cross-border merger is likely to come from one of those countries.
While a major cross-border merger could be on the horizon, smaller acquisitions are also likely to increase. With fintech VC funding drying up, many neobanks may struggle, providing larger banks with opportunities to acquire them at attractive prices and leverage their technology. Similarly, smaller niche banks facing increasing digitalization and regulatory pressure may either opt for outsourcing part of their activities to partners (such as Banking as a Service offerings, Payment Service Bureaus, RegTech SaaS solutions) or become acquisition targets.
Recent months have already seen activity in this area, for example in Belgium and the Nordic region:
Belgium:
In August 2023, Indosuez Wealth Management Group (a subsidiary of Crédit Agricole) signed an agreement to acquire a majority stake in Degroof Petercam.
In July 2024, Caisse d’Epargne Hauts de France, part of the French banking group BPCE, acquired the Belgian bank Nagelmackers.
Also in July 2024, Italian bank UniCredit acquired Polish banking infrastructure provider Vodeno and Belgian bank Aion Bank.
Additionally, Delen Private Bank reached an agreement with the shareholders of Antwerp private bank Dierickx Leys in July 2024.
Nordic Region:
In July 2023, Finland’s Nordea Bank acquired the Norwegian Retail and Private banking business of Danske Bank.
In January 2023, Norwegian lender DNB Bank took full control of Norwegian Sbanken.
In December 2022, Danish Jyske Bank bought the Danish business of Sweden-based Svenska Handelsbanken.
In December 2022, Norwegian Sparebanken Vest and Etne Sparebank merged.
These smaller M&A activities could potentially signal the start of a broader M&A wave in the European banking industry. It is definitely a trend worth monitoring closely.
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