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U.S. Banks to Benefit from Euro Woes?

The news out of the Eurozone crisis has been all about impending doom, but there is a silver lining for U.S. and Canadian banks, which have taken the opportunity to pick up some cheap European assets. The Financial Times reports:

The deleveraging process at eurozone banks is reshaping the US banking landscape. Lawyers, bankers and analysts say that many of the spoils of eurozone turmoil have gone to US banks, their Canadian competitors or specialised private equity groups and hedge funds, with Chinese operators also ramping up US operations.

“There’s a lot of activity that’s going on,” said Timothy Sloan, chief financial officer of [Wells Fargo]. “Some institution has got to step up and take on that business. It can’t just be us, so I think it is going to benefit ourselves, the larger regional banks and the Canadian banks.”

The change runs deep. Dutch banking and insurance giant ING was forced to sell its American crown jewels, its highly profitable online banking business, to Capital One, since European Union laws do not allow banks that received state bailouts to own foreign subsidiaries. Other European banks are finding themselves in a similar situation.

The more European banks are forced to bring their assets home, the more American banks stand to gain.

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  • thibaud

    Happy days are here again.

    Hurrah for our national champion banks!

    Good ol’ Citi, JP and BAC!

    Countrywide’s on our side! It’s a cinch with Merrill Lynch!

    Goldman Sachs has got yer backs!


  • Eurydice

    Well sure, the American banks already took their losses – that’s why they have room now to buy new assets.

  • Hubbub

    But will I, a good, loyal, average Joe American? That’s my question, and one I’ll not find an answer to until another disaster slaps me upside the head like a motor-oil saturated 2×4.

    WHAM, BAM, Thank ye, ma’am, no!

  • Anthony

    “The more European banks are forced to bring their assets home, the more American banks stand to gain.”

    WRM, are megabanks as currently constituted beneficial to the private sector (economic growth, job creation, etc.)?

  • Jim.

    Um, thibaud, didn’t you notice the bit about how the larger regional banks, and banks from your hero Canada, are going to see some gains here?

    For everyone who has to sell at a discount, there’s someone who gets to buy a a discount.

    Is it really so important to you that these people lose that you’d root against your country just to see opportunities pass them by?

    How is that “good governance”?

  • Don51

    European Union laws do not allow banks that received state bailouts to own foreign subsidiaries.

    Google – European banks took big slice of Fed aid

    No problem taking bailouts from the American taxpayer though.

  • Dr. Kenneth Noisewater

    Given the interlocking, nigh-incestuous nature of international banking, I doubt the US megabanks are going to net out for anything like a big gain, especially if they hold leveraged positions in European debt of any kind (real estate, consumer, corporate, or soverign).

    If any US banks benefit from repatriation or foreign depositors, it’ll be those that aren’t invested in Europe, such as small-to-midsize retail banks that stuck to their knitting. But of course, this will not do, so there’ll be swap lines and assorted other “stealth” bailouts from the Fed that will keep the zombie megabanks shambling about a little while longer, at the expense of those industrious and responsible smaller banks.

  • thibaud

    Interesting that our host would choose Capital One, of all companies, for his USA! USA! post du jour.

    Is Mr Mead aware of Capital One’s record in consumer banking?

    Is he aware that the European bank involved, Holland’s ING Bank, is one of the best-run and most ethical of the major multinational banks, one that has done well in the US by not only its shareholders but also its (former) US customers.

    Perhaps he should suppress his inner cheerleader for a minute and do a bit of research.

    Last week, the authorities finally caught up to this poster child for deceptive and abusive marketing practices and fined Capital One $210 million.


  • thibaud

    More on Mead’s latest national champion and its treatment of US customers below.

    This was brought to light, btw, not by a sudden religious conversion and confession on the part of the scam artists who run Capital one but by the Obama administration’s (tentative, to be sure) steps toward actually providing some regulation and enforcement of our rotten financial sector:

    CHICAGO (MarketWatch) — Federal regulators on Wednesday ordered Capital One Financial Corp. to reimburse $150 million to more than 2 million consumers who were duped into purchasing credit-card products they didn’t need or understand.

    The McLean, Va., company (US:COF) also was fined $60 million to settle “deceptive marketing tactics” leveled by the Consumer Financial Protection Bureau, empowered a year ago as the nation’s consumer watchdog.

    The CFPB probe found that Capital One’s third-party call-center vendors strong-armed consumers with low credit scores or low credit limits into add-on products when they called to have their new credit cards activated.

    … The CFPB said the Capital One vendors used “high-pressure tactics” to sell payment-protection and credit-monitoring plans… “Consumers were not always told that buying the products (were) optional,” according to the CFPB.

    “In other cases, consumers were wrongly told they were required to purchase the product in order to receive full information about it, but that they could cancel the product if they were not satisfied. Many of these consumers later had difficulty canceling when they called to do so.”

    In other cases, Capital One representatives sold the payment-protection plans, which cover up to 12 months of minimum payments if certain “life events” like job loss or temporary disability occur, to people who were already unemployed or disabled.

    Those consumers were ineligible but didn’t know it and paid full fees thinking they could file claims later, which were then denied.

  • thibaud

    Does our host have a financial interest in this corrupt bank that he’s touting?

  • Eurydice

    @thibaud – I don’t see how the phrase, “forced to sell its American crown jewels…to Capital One” can be interpreted as “touting” Capital One or showing it admiration of any sort. If anything, the choice of words paints a somewhat rapacious picture.

  • teapartydoc

    I see no cheerleading on the part of Mead. I do find it interesting that one commenter has written more words disparaging the prospect of someone managing to profit from the European debacle in a negative cheerleading form than did Mead in the primary post. This is more revealing than either the posting by Mead or any of the replies. Does this person have nothing to do?

  • thibaud

    Speaking of disclosure: a homeowner whose mortgage was transferred from ING to Capital One might be forgiven for taking an interest in a story by a non-financial blogger that follows how the homeowner’s largest single investment was transferred from the care of one of the industry’s most ethical banks to one of the industry’s worst.

    As to cheerleading, the author has said, and his posts attest to this, that he “roots for the home team.”

    This incident is a perfect case of why the Mudville 9 are not the ones we should be “rooting” for. If US assets and US customers are shifted from ING to Capital One, that’s a not-so-small loss for America and Americans.

    Not that anyone should interfere in this transaction, of course, but it’s a bit unseemly (not to mention embarrassing) to be promoting this particular transfer as good news for Americans.

  • richard40

    Dont worry thibaud, I’m sure your beloved Dodd/Frank regulation will head off any future risk to our system, yea right.

  • Crocodile Chuck

    This post is absurd. The Big Five US banks are insolvent. JPMorganChaseChemicalManufacturer’sHanoverBancOne WashingtonMutual, for example, is STILL writing off US$2B a QUARTER on residential mortgage lending.

    They are trading at less than their net tangible asset backing, indicating that they would be worth more broken up.

    Even the poster boy of shyster double dealing, in which every customer is a ‘counterparty’ is sucking fumes:

    The era of global mega banks is over; for which we should all be thankful.

  • Kris

    thibaud@13: “a homeowner whose mortgage was transferred from ING to Capital One might be forgiven”

    … for feeling bitter about the European banking regulations which caused this. Heck, if one were feeling particularly charitable, one might even forgive him for having second thoughts about said regulations.

  • thibaud

    #16 – Not so. The Dutch government, prudent as always, is ensuring that its major multinational bank is not exposed to a US market that is rife with cronyism and sharp practices.

    The pity here is that so many US-based banks are so corrupt and badly-managed.

  • Kris

    thibaud@17: In other words, the Dutch government is forcing its major bank to dump innocent US customers, leaving them high and dry. Thank heavens a US bank was willing to rescue them! 🙂

  • Liza @ InsuranceStraightTalk

    This is what we call finding opportunity in a difficult situation. Good for the US Banks. This indeed is a wise move.

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