Europe must wait at least five years for bank consolidation: CEOs

Thu Sep 3, 2015 8:51am EDT
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By Thomas Atkins and Jonathan Gould

FRANKFURT (Reuters) - Europe will have to wait at least five years before banks begin to consolidate across borders, as they wrestle with low interest rates, regulatory reforms and the need to overhaul technology, bank executives said.

Banks face pressures to refocus their business models and cut costs, pushing consolidation down the list of management priorities, Frederic Oudea, chief executive of Societe Generale (SOGN.PA: Quote), told a conference on Thursday.

“Consolidation is not at all on top of the agendas of bank CEOs,” Oudea said. “We are a sector that is facing a huge transformation (and) my first focus is on what I can achieve organically.”

Cross-border banking acquisitions in the euro area peaked in 2007, when a consortium led by Royal Bank of Scotland (RBS.L: Quote) bought ABN Amro in a deal that turned disastrous for all parties.

Some bankers had predicted that the launch of a common supervisor for large European banks in 2014 would create transparency and uniform capital structures, paving the way for cross-border combinations.

But big deals have been elusive as bankers grapple with new capital requirements and regulations that make complex banks more expensive to run.

While markets may put some banks under pressure to expand through acquisitions, banks themselves are not yet ready, said Federico Ghizzoni, CEO of Italy’s UniCredit (CRDI.MI: Quote), noting cross-border banks are hard to operate and cost savings from consolidation are difficult to achieve.

Another challenge dulling cross-border desire is the cost of upgrading technology, Oudea said.   Continued...

French bank Societe Generale Chairman and Chief Executive Officer Frederic Oudea speaks during the bank's 2014 annual results presentation in La Defense near Paris February 12, 2015.  REUTERS/Philippe Wojazer