US Banking Competition is Greatest it's Been in Years, Says Mike Mayo

Описание: Mike Mayo, Head of US Large Cap Bank Research at Wells Fargo, discusses competition in the banking sector.

Banco Santander SA agreed to acquire Webster Financial Corp. in a $12 billion deal that will allow Spain’s largest bank to bet big on the US.
The deal, one of the largest-ever US transactions by a European lender, marks a major push by Santander to expand its operations in the country beyond its roots as one of the country’s largest auto lenders. It’s part of Executive Chair Ana Botin’s focus on boosting the bank’s reach into growth markets, while cutting back in some European countries.
Santander has been bolstering its investment-banking operations in the US. The US has been one of the “largest value creators” for the bank, according to a statement.
Santander will pay a total consideration of $75 a share in cash and stock for Webster, the Spanish lender said in a statement Tuesday that confirmed a Bloomberg News report. That compares with Webster’s closing price of $66 a share Monday.
If you aren’t in the US, you “can’t aspire to be a global bank,” Botin said during a press conference Tuesday. She said in an analyst call that the bank will now steer clear of bolt-on deals for the next three years.
The transaction will create a more balanced US business with a cheaper funding base, analysts at Morgan Stanley said. But it may be poorly received with investors likely to have preferred excess capital to be used to “to fund additional cost saves and return to shareholders.”
Santander shares were down 3.8% at 9:15 a.m. in Madrid.
The biggest US lenders are pushing for a loosening of the European Union’s cap on banker bonuses to become part of a wider set of reforms focused on boosting the continent’s competitiveness, stoking tensions with their overseas rivals.
Firms including Goldman Sachs Group Inc., Citigroup Inc. and JPMorgan Chase & Co. are pushing for Europe’s finance lobbyists to take up the cause of the remuneration rules in their contributions to the EU’s upcoming review of its banking rulebook, according to people familiar with the matter who asked not to be identified because the discussions are confidential.
The UK has already dropped the restrictions, which cap bonuses at twice fixed salaries, in the spirit of freeing its industry from unnecessary burdens. The EU is now accelerating a planned review of its banking rule book after pressure from countries including France and Germany.
The Association for Financial Markets in Europe has agreed to put the issue on its wish list of reforms, one of the people said. The European Banking Federation has also been lobbied on the topic but did not include it in a letter it sent to senior European Commissioners last week on simplification reforms.
The matter has sparked tense debate in the industry associations, where the US banks’ position has been met with some resistance. While European banks also favor repealing the cap, the people said, they believe raising the issue could jeopardize progress on more financially meaningful reforms such as simplifying banks’ capital structure and reducing day-to-day regulatory burdens. 
The EU is expected to begin a consultation for its review next month. Representatives for AFME, JPMorgan, Goldman and Citigroup all declined to comment, while a spokesperson for the EBF did not respond to requests for comment.
Europe as an ‘Outsider’ 
US banks have less to gain from those wider reforms, and see a clear argument about the bonus restriction damaging EU competitiveness, since banks in London and the US have greater flexibility in how they reward staff, making them more attractive for top talent.
Despite the transatlantic split, there was unanimous agreement among AFME’s members that the bonus cap issue should be raised, one of the people said. The group’s members represent banks’ markets divisions, the part of the industry most impacted by the bonus cap and keenest for it to be repealed. 
Even if the EU rules are repealed, national authorities can always introduce their own versions, which can be more severe.



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