The renewed firepower and higher interest rates will give European banks an ideal opportunity this year to end their recent poor performance and regain market share from US competitors, industry experts said, quoted by Reuters.
European creditors lost ground at the expense of their Wall Street rivals during the pandemic because volatile markets supported the profitability of huge securities trading units of US banks. Their European competitors earn proportionally more than lending and benefit in an environment of higher interest rates.
At a time when Europe’s largest lenders are preparing to announce their results for 2021, starting with Deutsche Bank on Thursday, European banks are seizing the opportunity now, analysts and investors say.”European banks are increasingly in need of showing what they are really fighting for and how to differentiate themselves in order to create a long-term advantage,” said Eriola Shehu Beetz, Managing Director and Partner at Boston Consulting Group.In investment banking, American banks have beaten European competitors in their field on almost all indicators in recent years, and the gap is widening.JPMorgan, Goldman Sachs, Morgan Stanley, Citigroup and Bank of America have borne 31% of merger fees in Europe, the Middle East and Africa in 2021, according to Refinitiv. This is an increase of 26% compared to 2019, and their six largest European competitors have taken only 12%”What American banks are doing really well, and scale helps a little bit, is that they’ve consistently invested in technology in their capital markets business. That makes them much more resilient, “said Shehu Beetz.This is also reflected in the assessments.None of the ten largest European banks in terms of assets has a price-to-book ratio of more than one, while only Citgroup among their American equivalents has a ratio of less than one, according to Refinitiv. This shows a gap in the way investors evaluate creditors from both continents.