Local banking scene not enough for ‘national champions’

Is there still such a thing as a “national champion”, or are all fund houses and private banks now being caught by the cross-border bug?

While Greek banks experience daily withdrawals in the billions, as their savers fear a ‘Grexit’, Spain’s institutions remember how they too were being written off by members of Europe’s elite club, until they were rescued by a €100bn bailout package in 2012.

Now Spanish banks are seen as serious investment targets for institutional money and their country’s European credentials are no longer open to question. Not only have big institutions such as La Caixa, Santander and BBVA swallowed up a swathe of lesser, more poorly run players, but they are expanding internationally.

BBVA and Santander have long been fixtures in Latin American banking. The latter, having bought what used to be known as “Shabby Abbey” is also a leading player in the UK. In the asset management sphere, a merger between Santander’s funds unit and Italy’s Pioneer Investments – a subsidy of UniCredit – has created a new pan-European powerhouse. 

Less favourable demographics mean there is not as much money pouring into Spanish private banks as they might have once hoped, despite the country’s healthy current growth figure of 3 per cent, which is stronger than the US.

What has spurred a rebirth in Spanish wealth management has been investment in state-of-the-art technology. Five years ago, BBVA made a decision to modernise and digitise its platforms and customer relationships. It has never looked back. Competitors have played catch-up ever since. But they should be grateful to BBVA for lighting the flame.

The fears of Swiss banks, that if they started to conduct more of their business online, rather than in oak-panelled boardrooms, golf courses or plush hospitality suites, they would lose customers, have never materialised.

For those who have taken the plunge, extra touch points, through apps, web communities and secure communication channels, have simply increased contact and improved relationships between bank advisers and clients.

The French have internationalised for different reasons. A soporific domestic institutional market means the major fund houses of BNP Paribas and Amundi have been garnering most of their assets internationally for some time.

While Société Générale recently pulled back from Asia, selling its private banking franchise to Singapore’s DBS, its strategists have decided there are sufficient riches to tap closer to home. Target markets include not just France, but the nearby Benelux countries,  Central Europe, the Middle East, North Africa and increasing numbers of international clients using London as their financial  hub.

Even bosses at La Banque Postale (LBP), finance arm of the far from glamorous French post office, whose outposts can be found dotted across sparsely populated rural France, have opted for an international string to their bow.

French houses have traditionally been fixed income managers, some of them highly successful. But with interest rates set to coast along in barely positive territory, there is little attraction left for bonds, while hopeful chatter of a Great Rotation into equities once again begins to permeate through continental cafés.

This means new products need to be sourced for investors. LBP diligently went through all the options – sell up and go open architecture à la SocGen or Citi, buy up a new fund house with equity capacity, or strike a partnership deal with a foreign group, giving access to emerging market and global equities.

LBP partnered with Dutch insurer Aegon, seeing this as the least painful option and one to benefit its investors most. When you can buy fancy emerging market products down at your local post office, then globalisation is clearly unstoppable. Do not bet against more banks and fund houses, former national champions, joining the burgeoning cross-border club.