Official lists of credit institutions

Albania

Dubai (query for bank/banc/banque/credit in the company name and status = active)

European Union (query for individual banks available here)

Hong Kong

Japan

New York (query ‘Foreign Agency’ and ‘Foreign Branch’ to find the international banks in NY)

Norway

Russia

Serbia

Singapore

Switzerland

United Arab Emirates

United Kingdom

United States (national banks, supervised by the OCC)

If you know where to find official lists of banks in China, please let me know in the comments!

Random reads summer 2020

Banking update August-September 2020

  • ABN AMRO exits all its non-European corporate banking activities
  • CaixaBank and Bankia are planning a merger
  • HSBC wants to sell its French retail network
  • Rumors of a merger between Credit Suisse and UBS

The strategy of European banks ever since the Global Financial Crisis has been to focus on profitability1. How do you achieve a higher return on equity? There are two commonly followed options. Either you cut costs, e.g. by merging banks in the same geography and closing down the redundant branches. Or you sell the business, especially when you’re an also-ran outside of your home market.

Net Interest

Marc Rubinstein writes about the financial industry in his weekly newsletter Net Interest.

I especially liked his discussion of “front book, back book“. Banks and insurers accumulate a long-term book of assets. These generate a predictable stream of income (interest and premiums). Unfortunately, this “back book” exposes them to unexpected losses. As a result, financial firms need a lot of capital.

The business model of Software-as-a-Service (SaaS) companies is also based on a back book. However, unlike banks, their portfolio of subscribers does not require a lot of capital.

In the same newletter, Rubinstein discusses the possibility of bank M&A funded by badwill, as I suggested earlier.

BNP Paribas expands credit, banking in East Africa, and more

BNP Paribas expanded its balance sheet by 23% (!) in the first quarter of 2020, as companies took out emergency loans in response to the coronavirus panic.

Sean Pawley talks about banking in East Africa on the Palladium Podcast (discussion about banks between 6:50 and 22:15). Multiple issues with banking in Rwanda and other countries in the region: economy runs on cash payments -> banks lack reliable data on borrowers -> high default rates -> unstable banks, high interest rates and fees, preference of cash over bank deposits. His solution: a narrow bank that eliminates credit risk. Provide a cellphone-based payment solution. Collect payment data. Based on the data, start making loans.

The KBC mobile banking app will show highlights of the Belgian football Pro League. This service is available to anyone who installs the app, including non-customers.

Climate change’s new ally: big finance discusses the role of asset managers in reducing emissions.

A model of the Eurozone architecture embedded in the global US dollar system by Steffen Murau (using the analytical framework of interlocking balance sheets!)

Facts and myths about bank leverage ratios (from 2014, but timeless). Dan Davies explains why reducing risk to a single metric cannot work.

More on the miracles of bank regulation:

Revisiting the Ides of March: how banks’ liquidity rules complicated the corporate demand for cash during the coronavirus panic of March 2020.

Multinational banks in Africa

The Asian Banker has an overview of the largest banks in Africa and the Middle East.

European Payments Initiative

A group of 16 European banks are working on a unified card and digital wallet that can be used across Europe.

The founders of the European Payments Initiative (EPI) include all major French, German and Spanish banks.

I’m curious why Intesa Sanpaolo1 and the Austrian and Nordic banks haven’t joined.

A pan-European payment solution is long overdue. Payment providers like Visa, Mastercard and PayPal have profit margins that European banks can only dream of. Increased competition and lower prices would be great for sellers and consumers.

Links: Yemeni money, IT migration screw-up, ECB response to Covid-19 and more

Some interesting articles I came across recently:

Yemen has two governments (civil war), one currency, and two monetary systems.

IT project management horror story at German Apobank (in German).

Overview of the Eurosystem response to the pandemic.

What central banks have done to help the economy survive Covid-19

Central bank responses to the pandemic. Source: Banque de France

Historical lessons from large increases in government debt

Euro area economic expansions are like Tolkien’s Elves: they don’t die of old age. The most recent one was murdered by corona.

(On a sidenote: I’ve been critical about the lack of blogging at the ECB. But it turns out that the Banque de France’s Eco Notepad is an excellent blog, as the four articles above show!)

All of the World’s Money and Markets in One Visualization

How may clicks to open a bank account? (Built for Mars on the user experience of retail banking)

The Economic Foundations of Industrial Policy: an amazing longread (very long!) on productivity, explaining why rich nations are rich

Ancient history: “In 2003, refinancing via LTROs amounts to 45 bln Euro which is about 20% of overall liquidity provided by the ECB.” (On June 18, 2020, banks borrowed 1.31 trillion euro from the ECB via TLTRO!)

The case for a corona consolidation of European banks and insurers

Many European banks and insurance companies are trading well below their book value.

Large firms can unlock a lot of value by taking over smaller competitors, thanks to the negative goodwill. Consolidation would support the profitability of the financial industry.

Italy

Italian banks in particular would benefit from a consolidation of their fragmented domestic market1. In February, Intesa Sanpaolo launched a bid for UBI Banca. UniCredit should consider a similar deal with Banco BPM, Banca Monte dei Paschi di Siena or BPER Banca. Also, French BNP Paribas could merge its subsidiary BNL with one of those banks.

Spain

Spanish banking is already quite concentrated. Santander took over Banco Popular in 2017. The integration was completed in 2019. Santander and BBVA could acquire Bankinter, Bankia, or Banco de Sabadell. Of course, further domestic growth of the majors depends on regulatory approval. The two global Spanish banks definitely have the expertise to execute such an operation.

Figure 1 shows the number of bank branches relative to population for Spain, Italy and the Netherlands. It’s clear that Italy and Spain have a lot of potential for cost cutting.

Figure 1: Commercial bank branches per 100,000 adults in Spain, Italy and the Netherlands. Source: World Bank.

Portugal, Poland and the Netherlands

In neighbouring Portugal, Banco Comercial Português seems a good match for Santander. Especially since both Iberian banks are active in Poland. Speaking of Poland, Santander and ING might be interested in mBank. mBank is owned by Commerzbank, a bank that desperately needs to focus its strategy.

A foreign group could shake up the uncompetitive Dutch market by buying ABN AMRO. However, as most of ABN AMRO is still state owned, this will be complicated.

Insurance

Many listed insurers like Aegon, NN Group (NL), Ageas (BE), Baloise, Swiss Life (CH) or UnipolSai (IT) trade at a significant discount to their book value. This could be an opportunity for big insurance companies AXA, Allianz and Zurich Insurance Group.

Consortiums of buyers could also divide the operations of their targets (although there is a bad precedent for this scenario).

Exciting times!

Update 9 June 2020: Banco Sabadell plans to close 235 branches

Update 23 July 2020: Marc Rubinstein at Net Interest came to the same conclusion: “Coming out of Covid, when banks realise they don’t need such a large physical presence, further consolidation is likely. What’s more, if equity valuations don’t recover, banks may be able to use negative goodwill to cover restructuring charges.”