European Banks. What's Wrong With us.

As the title says, when will the European banks work their way to the top? Will it ever happen? European industry still relies mostly on American banks for cap raising. What can Europe do?

Since the crisis RBS is just fucked, still to this day it just hasn't rebounded to the level it was at.
UBS basically centres in PWM. Not great deal flow
BarCap is doing alright in terms of dealflow but no where near the American banks.
Deutsche is... well we all know what Deutsche is going through.

Compare this to JPM/GS/MS/Citi. European banks just don't stack up.

Will us European's forever live in the shadow lol.

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Comments (11)

Most Helpful
Sep 18, 2018

Maybe if you didn't take the entire month of August off... I know so many deals that we avoid taking to Europe because the common perception is that you'll be gone or hard to reach in August. Because of that, we don't talk to you in June or July either, knowing that your vacations will interrupt our processes.

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Sep 19, 2018

Europeans need to be better hustlers.

Sep 18, 2018

The political stranglehold of US banks in the US puts them far ahead what European banks can do, due to the fact that at best they have strong ties to their national govts, but Brussels is a convoluted mess of bureacrat inefficiency.

Though in the long term, Europeans won't have to suffer what Americans will have to.

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Sep 18, 2018

Credit Suisse has a strong North American IB presence and they're doing pretty solid AFAIK.

lol @ BNP Paribas

"Work ethic, work ethic" - Vince Vaughn
Sep 18, 2018

Also the fact that individual national European markets are smaller than the US? Germany is big for Europe but small compared to the US so most banks become national level MM players (BNP, SocGen, UniCredit etc)

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Sep 19, 2018

I'd probably put that on a number of factors:

  • The US has a real IB culture. Many forget that Europe only entered this world around the 1990s/2000s. That is why if you go to Barclays, arguably the strongest EU IB, you'll notice most senior management comes from US banks, particularly from Lehman.
  • The European economy hasn't recovered post-crisis like the US one did. Sure we have a $20 trillion GDP, but the continent is still dragged down by a number of countries: Spain unemployment, Greek crisis, French hostility to finance, etc. Furthermore, a lot of Eastern countries which are in the EU are more akin to an emerging country than a developed one and thus don't put so much weight on finance to develop their economy.
  • European economies as a whole do not rely as much on finance as the US. Best example for this would be to look at the debt sector. Leverage is way lower for both individuals and corporates in the EU and thus there is simply less deal opportunity.
  • It could be argued that Europe has less of an entrepreneur mindset. We don't have that many revolutionary new firms, and the few that we have are nowhere close to a $1 trillion valuation.
  • European banks are more regulated as a whole and due to being smaller in size originally (less too big to fail in EU vs US) have less leeway to negotiate/lobby.
  • Last but not least: the European Central Bank screwed up. It took too long to jump in and buy off risky assets from banks, unlike the FED, which forced States to nationalize some banks (RBS) and others to greatly downsize their IB operations. Then, when the ECB finally introduced QE and 0% (sometimes negative) rates, it now held them for too long. Because of this we now have an environment with 0 volatility and thus little trading activity.

Overall, Europe simply relies less on finance historically, has a different culture relative to banking and faces low volatility (bad for markets business) and low growth (bad of IBD business) in its home markets.

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Sep 19, 2018

american psycho

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Sep 19, 2018

Europe and USA have roughly the same GDP ($20.2 tn, $20.4 tn), though the top 15 European countries (out of, say 40) make up 90% of the GDP.

In each and every country, there are local investment banks - so you can imagine how many there are in total. Not to mention that the east-European economy didn't really start until the fall of Soviet, in the sense of private entities and banks. Remember, many of the major US banks have roots that go back 200 year, and have gone through many branches of mergers.

Furthermore, it's very hard to compare an investment bank in Norway, to some investment bank in Romania. They focus on completely different deals, have to follow different rules / laws, etc. Now multiply that by 40.

Investment banks don't really appear before there's a real need for them, and many European countries didn't start to prosper until the 70's / 80's, economically speaking. De-regularization of the financial markets also helped to fuel them. Many European countries have had a very strate-driven policy, with tons of regulations. And as some above mentioned, we haven't had the same focus on entrepreneurship here, as in the US.

Sep 19, 2018

Not really buying the middle part of the argument @tackytech . There are likely just as many (if not more) local/regional/middle-market players in the U.S. as there local banks in the individual countries in Europe. Plus at some size threshold globally there are only a handful of banks that will be hired to execute deals and the list is disproportionately American based banks.

@Toini01 I think hit on basically everything. Less entrepreneurial attitude (not just starting companies but also doing transformative activities like M&A), less debt, and poor utilization of the macro levers by the powers that be. The only thing I would add is that regulation throughout companies in Europe (unions, work councils, etc.) often make it difficult to do deals (certainly more so than the U.S.)

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Sep 19, 2018

This is only anecdotal, but I work with counterparties from all over the world, and European counterparties as a group are by far the slowest to respond and the most burdensome to deal with from a regulatory/compliance perspective. They just don't "play ball" the way that counterparties from the US and Asia do.

Sep 19, 2018