Last month, 158-year-old Lehman Brothers ceased to exist and filed for bankruptcy protection, while its North American investment banking business has been acquired by Barclays Capital for $1.75bn, which among others, adds a significant mergers and acquisitions presence to the UK bank.
Lehman’s market capitalisation only 12 months ago was about $33bn while in mid- September this year it was $90m. Merrill Lynch has been acquired by Bank of America, advanced takeover discussions have emerged between HBOS and Lloyds TSB and there are talks about a deal between Morgan Stanley and Wachovia.
Following such events, The Banker’s ranking of top banks by Tier 1 capital will look rather different from its official version, published in our July edition. Based on last year’s figures, Bank of America/ Merrill Lynch tops the ranking with more than $115bn in Tier 1 capital, while the top position based on assets goes to Royal Bank of Scotland.
JPMorgan Chase, which has recently acquired Bear Stearns (also critically hit by the credit crisis) jumps to the third position with more than $100bn.
There would be a significant leap forward also for the potential group formed by Morgan Stanley and Wachovia, in seventh place should the deal go ahead, and for Lloyds TSB/HBOS, in eighth position.
Wachovia previously featured as the 19th largest bank by Tier 1 capital, while HBOS occupied the 14th position, followed at a distance by Lloyds, 32nd in the ranking. HSBC and Citigroup would slip from first and second position respectively to second and fourth.
Morgan Stanley is also in discussion with a leading shareholder, China Investment Corporation, which owns a 9.9% share, about expanding its stake. CIC was previously part of the Bank of America-led consortium that was considering a takeover bid for Lehman Brothers, alongside JC Flowers. Christopher Flowers manages about $3.2bn of CIC’s money in a fund dedicated to taking stakes in financial institutions.
Other institutions remain under pressure, with insurer AIG being bailed out by the US government and heavy share losses in US regional lender Washington Mutual.
