Big Mergers - Will Your Firm Be Involved ?

With talk of mergers once again in the air, CityNews looks at the big players to assess whether they are likely to be buyers, sellers or will just sit out the next round of consolidation in the industry.

Here are our views:

Buyers -

Bank of America

Despite the recent big deal, the bank remains in the market for a UK retail business (probably the Abbey) and may also take on an investment bank when the time is right.

BNP Paribas

Bigger than most people realise and much more powerful to boot. Upset that it did not land Credit Agricole and determined to continue to expand. Although a deal with SocGen is said to be unlikely as key people at the banks just don't get on, some of these will leave before too long, leaving the way ahead clearer for a deal.

Deutsche Bank

Pride would not let this German powerhouse be acquired. Busy getting its house in order and buying up its own shares of late. Done the big deals before and keen to build on its US investment banking franchise. A deal with a top US securities house cannot be ruled out.

HSBC

Now the biggest company in the UK. Top of the heap over here. The bank is said to have done no less than 28 takeovers of smaller businesses in the last 21 months. Will probably continue to grow by snapping up smaller rivals in a variety of complimentary businesses. A US securities firm will look tempting and HSBC could certainly afford a big purchase. This is thought unlikely, however, as the bank's cautious board may think it too risky.

UBS

Been there. Done it, wears the merger T-shirt. SBC Warburg, PaineWebber and other deals. Has deep pockets. Successfully now worked through previous mergers. Keen to build US investment banking franchise. Could well make a Wall Street move.


The Sellers

Barclays Capital

CEO Bob Diamond missed out on the top Barclays Plc job. The shine will soon come off the bond market. If Bob goes, the unit will seem less attractive and could soon be regarded as non-core. A likely target, but who'd buy it ? Perhaps, in time, Bank of America - the price for backing away from a bid for the whole bank ?

DrKW

Allianz's investment banking unit. Always will be included in articles like this. The German insurer will stick to its guns and give the unit its head. After two years, who knows ? One to watch, but probably safe for now.


Merger Possibilities

Safe itself from acquisition, ABN Amro could be up for the old Barings business. Investment banking is but a small piece of the ING empire and the group has never really known what to do with the business since it paid its £1 in 1995. A logical move if times were good, but ABN will probably just cherry-pick key staff and leave the whole business well alone. ING's investment banking division will continue along until a decision is made back in Holland about its future. As long as the division makes money, it will probably be OK.

Commerzbank and HVB Group. The on-off merger is currently off, but these banks may have to merge to survive. A deal of some kind looks almost certain.

Societe Generale - see BNP Paribas above.

Goldman Sachs, Lehman Brothers, Merrill Lynch and Morgan Stanley.

Will banks without large balance sheets be able to survive ? Will the big US securities house eventually be gobbled up by their larger US commercial banking rivals ? This is the big question. Will these firms have to merge with each other to survive ?

The cynics suggest that Merrill Lynch CEO Stan O'Neal has been busy over the last 18 months dressing the business up for sale. Possible. There was talk not too long ago of a possible tie-up with HSBC or even Deutsche Bank. Lehman is relatively small and again is always mentioned as a possible takeover target. But the firm endures and seems to successfully stand alone. And can one imagine someone having the audacity to make a move on Goldman or Morgan Stanley ?


On The Fence

Credit Suisse

Long-rumoured to be wanting to get shot of CSFB, this is unlikely now as the firm is making money. Although the bank has got deep pockets, it is still licking its wounds after the 2000 CFSB / DLJ deal and has also yet to resolve some of the problems in its insurance business. Probably just a watcher for the foreseeable future.

Citigroup

The most profitable company in the world and the largest financial services group. Making $4bn each quarter with ease. New CEO, Charles Prince, will want to get his feet under the table. It's not broken, so doubtful if any large deals will need to be done in the short-term. Further ahead, Prince will want to step out of the shadows of former CEO and current chairman Sandy Weill. Deals may be done just to show that he is his own man.

JP Morgan

A big deal is extremely unlikely at the moment. CEO Bill Harrison has ruled it out and many feel that it would be suicide to try something clever for a couple of years yet. Just recovering from the 2000 Chase / JP Morgan merger, shareholders want their pound of flesh and be shown the profits. An asset management or retail banking deal could be on the cards, but the boss, the staff and the shareholders have no appetite for another investment banking purchase some time soon.

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