Rebirth of England.

Chapter 948 Laying a solid foundation
“Europe needs stronger banks to help it grow its economy and compete with other large economies…”

This was the speech made by Christine Lagarde, President of Continental United Bank (CUB), at this year's European Banking Conference.

In fact, Lagarde's statement has also been recognized by many people.

If we only look at the banks in the top rankings based on market capitalization, Wells Fargo is close to $2500 billion; JPMorgan Chase is close to $2200 billion; Bank of America is close to $1700 billion; Citigroup is close to $1500 billion...

Among the European and American banks with a market value of over US$100 billion, the only non-American banks are HSBC Holdings and Standard Chartered Merrill Lynch.

But the Bank of England is often not regarded as a European bank. After all, Britain has always sought to maintain a certain degree of independence in banking supervision and is reluctant to integrate into Europe in this regard.

Because London is a global financial center, Britain is unwilling to allow it to be regulated by Europe.

By this calculation, the more powerful European banks such as BNP Paribas, UBS Group and Deutsche Bank are all considered "little brothers" compared to Bank of America.

In fact, before the subprime mortgage crisis, European banks including UBS, Deutsche Bank, and BNP Paribas were important competitors of Bank of America...

However, after that, until Barron was reborn in his previous life, it can only be said that European banks were getting worse and worse.

But now that these words have been spoken by Christine Lagarde, president of Eurobank, which was formed last year through the merger of French bank Natixis and German bank Commerzbank, it is inevitable that people will wonder whether Eurobank has set its sights on another bank and is planning to acquire it?
After all, Christine Lagarde was known for her aggressive and tough approach in her previous career, especially when she served as French Finance Minister.

"We are still sorting out the merged business and transforming the business of Eurobank, deepening existing business and expanding non-interest business income..."

In response, Lagarde said:
"As for acquiring other banks or businesses to expand our scale, it is not within our short-term consideration. Everything needs to be done after we are well prepared..."

As the president of Eurobank, after completing the merger of the two banks last year, Lagarde formulated a development plan for Eurobank that is based on retail business and balances the development of wholesale business and wealth management business.

The so-called retail business, also known as community banking in banks, mainly provides a series of financial products and services including savings, investments, insurance, trusts, etc. to ordinary consumers and small and medium-sized enterprises (annual sales of less than 500 million US dollars).

Wholesale banking business mainly provides investment banking, cash management and other services to large and medium-sized enterprises (annual sales greater than US$500 million), institutions and social groups.

The wealth management business uses a planning approach to provide customers with a range of financial products and financial advisory services.

Therefore, at present, Eurobank mainly utilizes the business outlets of the two original banks, expands them, and deepens its retail banking business as the basis for its development.

Of course, this does not mean that Eurobank will abandon or shrink its wholesale banking and wealth management businesses.

After all, NM Rothschild Bank, which was first acquired by Natixis Bank, had a very good foundation in these businesses, especially the private banking business for high net worth individuals. In addition, in some of Barron's previous acquisitions in Europe, such as O2 Telecom's acquisition of E-Plus, the German subsidiary of KPN of the Netherlands, and a series of acquisitions by Alstom Group, Eurofins Bank participated in them and provided loans. These businesses can bring good profits to Eurofins Bank.

Although Lagarde responded publicly to the media, it does not mean that Eurobank really has no plans to continue the acquisition. It is just that they need to complete the integration of the two previous banks' businesses and solve some problems before they can move forward with these plans.

For example, Eurobank has cooperated with Cavendish Asset Management to sell its previously owned non-performing assets involving real estate mortgages to supplement its own liquidity.

After the initial success of the cooperation, the two parties also expanded the scope of cooperation. So far, all the non-performing assets related to real estate mortgages caused by the subprime mortgage crisis of Eurohypo, a real estate bank owned by Commerzbank, have been cleared - including some "toxic assets" contained in Dresdner Bank previously acquired by Commerzbank.

This also significantly reduced the non-performing asset ratio of Eurobank and brought the bank's capital adequacy ratio up to the required standards.

In fact, of the two large banks controlled by Barron, Standard Chartered Bank belongs to the current Standard Chartered Merrill Lynch Group. Although its headquarters is still located in London, through the merger with Merrill Lynch, Standard Chartered Merrill Lynch Group has become closer to Wall Street capital in terms of behavior.

Barron is also consciously weakening the country to which Standard Chartered Merrill Lynch belongs, that is, the attributes of British capital, and developing towards global capital, or in other words, closer to Wall Street capital.

After all, this will enable Standard Chartered Merrill Lynch to better develop its business in North America, especially Merrill Lynch Investment Management, to which its wealth management business belongs, which has been named one of the three giants of global wealth management along with BlackRock and Vanguard.

In this case, the other bank he controls, Eurobank, will naturally highlight its attributes as a "European bank" and will also serve as one of his main financing channels for future expansion and mergers and acquisitions in Europe.

As for another bank he controls, the United Bank of Africa, it is not yet considered a "large bank" and will mainly conduct business in Africa, which is different from Standard Chartered Bank and Euronext Bank.

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“Five years have passed since the subprime mortgage crisis, and the European real estate industry has shown signs of recovery. We still need to develop Eurohypo into the best real estate bank in Europe and re-enter the field of housing mortgage loans…”

It can be said that after the outbreak of the subprime mortgage crisis, many banks had large amounts of non-performing assets, which also led to some banks becoming increasingly conservative in their market strategies for entering housing mortgage loans over the years.

However, Lagarde believes that we should not give up because of fear. She once said to Ashley Webb:

"After completing the merger, our first priority is to improve asset quality and steadily increase capital adequacy ratios. But after that, we still need sufficient profits to maintain expansion. From the development of the banking industry in the United States, we can see that mergers and acquisitions in the banking industry are very necessary. This is a story about running. Those who run slowly will exit the market or be acquired."

"I have studied Wells Fargo, which has grown rapidly in recent years. They have proposed that in terms of importance to Americans and relevance to financial security, no other financial product can compare to home mortgage loans. In fact, the same is true for Europeans..."

Persuaded by Lagarde, Eurobank is still preparing to enter the housing mortgage loan market through its real estate bank Eurohypo, not only to meet customers' housing mortgage loan needs, but also to meet their mortgage-related financial service needs.

(End of this chapter)