NEW YORK (
) -- Europe is on sale and U.S. financial companies appear interested in finding some bargains amid the distress.
"There's been a concerted effort from some of the larger U.S. banks to put aside resources to go after European players -- not only at the individual or at the group level -- but to actually consider acquiring European banks and/or funds," says Gustavo Dolfino, a New York-based headhunter with Accretive Solutions.
Rochdale Securities analyst Dick Bove also expects to see big U.S. banks grow their asset management arms in Europe, and that means buying entire companies, or at least divisions of companies. Bove also expects stiff competition for unsexy but highly profitable and steady back office businesses such as custody and payment processing.
State Street Corp.
has provided a recent example of both types of deals. It bought
's securities services business, with operations in Italy and Luxembourg for nearly $2 billion in May. Then, on Oct. 22 State Street announced a $79 million deal to buy
Bank of Ireland
's asset management unit.
"In my mind there's no doubt about it. There will be constant pressure on the part of the American banks to make acquisitions of people and those types of businesses," Bove says.
While adding selected talent may make sense in investment banking and trading, "If it's an asset management company it makes sense to acquire the whole company because you can't basically steal enough people to have an impact," Bove says. "The European banks will be selling their asset management divisions in order to generate capital."
Large scale acquisitions of European banks by U.S. ones appear less likely to Sandler O'Neill analyst Jeff Harte, but Harte believes things are clearly picking up on the hiring front.
"There's been a general tone for the investment banks to kind of re-push for growth in Europe after a number of years of retrenching," he says.
, which lost several high-level bankers over the past year and a half, has 488 job openings in Europe, the Middle East and Africa listed on its website,
reported last month, noting the site doesn't list the most senior positions. The report cites U.K. government data which shows headcount at Citigroup's European investment bank has fallen roughly 17% over the past three years. A Citigroup spokesman declined to comment on the report.
The European hiring picture is hardly without complications, according to Alan Johnson, a compensation consultant based in New York who counts
and Citigroup among his clients.
Johnson says the prospect of further punitive measures such as the 2009 U.K. tax on banker bonuses cast a pall of uncertainty over potential expansion plans. He says a similarly hostile climate in the U.S. toward the big banks gives top executives another incentive to direct the bulk of their attention to Asia, in addition to higher growth expectations.
'Why not just go to Hong Kong and not have to deal with any of this nonsense?' is how Johnson characterizes the mindset.
U.S. banks have some catching up to do in Europe when in comes to the lucrative merger advisory business. Five of the top six U.S. investment banks lost European M&A market share to competitors from other countries during the past year. Morgan Stanley was the only U.S. bank that picked up market share, while Goldman, JPMorgan, Citigroup,
Bank of America
all showed declines, as the chart below reveals.
Of course M&A advisory work, while high profile and highly profitable, is only one of a host of businesses in which U.S. financial firms compete for business with one another. Accretive's Dolfino says traders in commodities and foreign exchange products are in high demand, as are traders in distressed debt, as well as bankers with expertise in the financial institutions, healthcare, oil and gas and clean energy sectors.
One area where U.S. financial companies won't look to expand in Europe, most observers agree, will be retail banking. While Citigroup is looking to expand its retail footprint globally, it will focus mainly on emerging markets, according to a person with knowledge of the bank's plans.
"The mindset of U.S. retail institutions really is very much focused on the good old U.S. of A," says John Chrin, a Lehigh University professor and former co-head of the JPMorgan investment banking unit that advises financial companies on acquisitions.
Written by Dan Freed in New York
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