Banking on acquisitions
For most of this year, it seems like there's been an announcement of a major bank deal every two week. In the past week, however, the merger frenzy gas gone into overdrive. Here's a rundown of the latest stories:
Mistubishi/Sumitomo vie for UFJ
Two of Japan's largest banks, #2 Mitsubishi Tokyo Financial and #3 Sumitomo Mitsui Banking are fighting to merge with #4 UFJ Holdings. A deal between UFJ and Mitsubishi had been announced when Sumitomo entered the fray. UFJ is in trouble because of excessive bad loans.
The winner will become bot only the largest Japanese bank (outdistancing Mizuho Financial Group), but also the largest bank in the world. The combined assets of UFJ and Sumitomo would be $1,6 trillion, while a UFJ-Mitsubishi merger would have $1.75 trillion. By comparison, the current world leader, the US-based Citigroup, has $1.3 trillion in assets.
In a Wall Street Journal article ("Banking Duel In Japan Signals End of Old Ways", 8/2/2004), reporter Martin Fackler notes:
The boldness of Sumitomo Mitsui's move shows change in the industry is reaching critical mass, speeding banking's transition from what was a cozy world of backroom deals and collusion among bankers, regulators and auditors into something much closer to a contentious, free market.
New rules in Japanese banking are forcing these sluggish behemoths to get bigger while returning higher profits for shareholders.
More on Banco Santander and Abbey National
While it was generally considered that Spain's Banco Santander's acquisition of the UK's #6 bank, Abbey National, was a done deal, British banker HBOS indicated that it might make a counter-offer. HBOS PLC is the result of a 2001 merger between Halifax Bank of England and the Bank of Scotland, and while it retail banking isn't as strong as some others (it's #4 overall), it is the #1 mortgage lender in the UK, This is an unlikely, but not impossible, combination, since British bank regulators had already rejected a 2000 bid by UK's Lloyds TSB Group, trying to avoid further consolidation of the British banking industry. The announcement, however, may cause a slowdown of Banco Santander's plans.
It's generally believed that if the Banco Santander/Abbey deal comes off, it will spark a round of cross-border bank mergers in Europe. It must be said that Britain and Spain are among the most consolidated bank systems at present.
European Banks by Market Capitalization
| Bank |
Country |
European rank |
World rank |
| HSBC |
UK |
1 |
3 |
| Royal Bank of Scotland |
UK |
2 |
6 |
| UBS |
Switzerland |
3 |
8 |
| Santander + Abbey |
Spain/UK |
4 |
9 |
| Barclays |
UK |
5 |
13 |
| BNP Paribas |
France |
6 |
14 |
| ING |
Netherlands |
7 |
15 |
| HBOS |
UK |
8 |
17 |
Fears are running high that a foreign takeover of Abbey may open the door for further such moves in the UK (according to a Wall Street Journal article called "Interest in U.K. Banks May Heat Up", 8/2/2004). Approval of the Abbey National deal might set a precedent. Banks like Citigroup and Bank of America are looking abroad, and they have the funds.
Fifth Third/First National of Florida
In a combination of two strong regional banks, Cincinnati-based Fifth Third Bancorp will acquire National Bancshares of Florida, the largest bank holding company in Florida, owning the First Nation Bank of Florida chain. The deal is for around $1.5 billion. The new combined bank will have combined revenue over $6 billion.
First Third has a long history of snatching up banks, and has spread throughout the Midwest. Several sources note that First Third is a perpetual acquisition candidate itself, and spreading in a big way into the fast-growing Florida market may make it even more desirable. (By the way, the curious name Fifth Third is based on 1908 merger of the Fifth National bank and the Third National Bank.)
Multinationals expand in Asia
General Electric, through its Consumer Finance division, has announced it will buy a 36% stake in Korea-based Hyundai Capital, the finance arm of Hyundai Motor Group. That would expand GE's consumer finance presence in Asia. It already has operations in Hong Kong, India, Indonesia, Singapore, Taiwan, and Thailand.
Meanwhile, British bank HSBC has announced it will buy a 19.9% stake in China's Bank of Communications. The bank is the fifth-largest bank in China, having 2,700 branches around China. The price, not yet announced, will be more than $1 billion. HSBC already has a major presence in Hong Kong, and Taiwan, with lots of Chinese-speaking management. It also has some smaller investments in insurance and in other banks. It is thought that this deal may give HSBC a leg up on buying a share of one the four largest, formerly state-run Chinese banks, which are reportedly looking for suitors.
7:40:31 PM 
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