Across The BorderEuropean banks in search of a reason for being
Lenders in Europe facing trouble at home are taking different approaches as they look to the East
European banks facing challenges in their home markets are adopting different strategies in Asia. Many have withdrawn from markets or product areas, with analysts expecting further cuts to come, while others see Asia as offering an opportunity to develop growth.
This week, the International Monetary Fund called for “urgent and comprehensive action” to resolve the difficulties in European banks. “Many European banks continue to struggle with still-high levels of impaired assets and low profitability,” the organisation added in its global financial stability report.
Deutsche Bank is generating the most headlines as its share price rises and falls based on speculation as to the size of its fine from US regulators, which may be as much as US$14 billion, for mis-selling mortgage-backed bonds, but many banks are cutting jobs in Europe, with announcements last week from Commerzbank of Germany and Dutch banking group ING among the latest.
For a big global bank, there is little point being a minor player in retail banking in a market
Banking difficulties are not limited to Europe, however, and even the big Chinese state-owned banks reported near-flat profit growth for the first half of this year.
However, European banks in Asia are less well-off than some of their overseas competitors. “An advantage the US banks in Asia have over the Europeans is that in their home market things are looking up a bit,” said Claudio Lago de Lanzós, a partner at consultancy Oliver Wyman.
“European players in Asia are reacting differently to this. Some look at the region as one of their key growth engines, and are doubling down on places like China for example, while others are starting to retrench from Asia-Pacific due to the strong cost and capital pressures.”
