During BNP Paribas’ annual shareholder meeting on Tuesday, CEO Jean-Laurent Bonnafé downplayed the likelihood of a resurgence in merger and acquisition (M&A) activity within European banking. He noted that the economic viability of cross-border and even some domestic deals was often questionable.
Bonnafé’s remarks followed Spain’s BBVA launching a hostile 12.2 billion euro ($13.20 billion) takeover bid for its domestic peer Sabadell last week. Additionally, French President Emmanuel Macron’s recent statement advocating for more banking consolidation in Europe added to the discussion.
Addressing the possibility of BNP Paribas acquiring Sabadell, Bonnafé stated, “If you’re not a domestic player, you can’t buy a player like Sabadell… There’s no way that a non-Spanish bank could position itself as a white knight in a situation like this.”
Cross-border banking deals in Europe face numerous challenges, including varying regulations and labor laws, the absence of a euro zone-wide deposit insurance scheme, and political complexities.
Bonnafé highlighted the disparities between European and American banking deals, stating, “When you acquire a Texas bank and you’re a Californian bank, if you have 100 cost synergies, and you do the same thing in Europe between two different countries, it’s not 100 cost synergies that you’re going to have, it’s 33.”
European regulators have long advocated for more consolidation to enhance financial stability, especially considering that many lenders have smaller market values than they did during the global financial crisis.
Commenting on domestic banking deals, Bonnafé remarked, “You have to pay more than the price of the target; you have to buy it at a premium and when you’re bigger, supervision means you need even more.”
Sergio Ermotti, CEO of Swiss bank UBS, expressed a desire for more deals but was not optimistic about the prospect. He emphasized the necessity of a European banking union and a proper framework for achieving consolidation, stating, “It’s going to be very hard to achieve a European consolidation without banking union and a proper framework, but domestic consolidation is still possible within Europe. There has to be a way over time to develop something that is not triggered by a crisis.”