The total of outstanding bonds and equities in Europe amounts to more than twice continental gross domestic product, whereas in the US it is more than three times that of a similar sized economy. Ergo: Europe has a lot of catching up to do.
Hence European banks have a strong future, and past fears that the bulge bracket would wipe out regional banks appear misplaced. Small wonder that a fight has broken out over who gets ABN AMRO and that two regional players, SG and BarCap, come near the top of the pile in terms of investment banking performance.
Jean-Pierre Mustier, CEO of SG CIB, says: “Europe will close the gap with the US in capital markets terms in the next five to 10 years. This provides a very strong future for European regional banks and accounts for why US banks are looking to Europe. It’s not only to do with Sarbanes-Oxley, it’s because they see great opportunities.”
The US market, where the dominance of the major players is difficult to break, is not as attractive for European banks, and in Asia, capital markets growth is strong but starting from a low base. “Capital markets in emerging Asia will probably not reach European or US levels for several more decades,” says Mr Mustier.
SG has recently reorganised its corporate and investment banking activities under a programme called ‘Step up 2010’ with the aim of offering product expertise across asset classes for specific client segments. “We have changed the way we are organised to adapt ourselves to the evolution of the market and our clients. These days you need an integrated offer for both issuers and investors,” says Mr Mustier.
The new set-up also reflects a change in the bonus scheme so that bankers are rewarded for the overall deal and not just for selling their particular product.
