Barclays' takeover of Spanish Banco Zaragozano for E1.1 billion will significantly strengthen its position in the Spanish market. This move has sparked discussions over further pan-European mergers and acquisition activities in the banking sector.
Barclays is to takeover Banco Zaragozano of Spain for E1.1billion. It has long been expected that Barclays would attempt a move to strengthen its position on the continent and the Spanish market is generally performing well compared to other markets. Through this deal Barclays will improve its position in Spain dramatically and the combined company will be the sixth largest player in the Spanish banking market.
This move by Barclays has fuelled discussion about further European banking sector consolidation. There have been many rumors about mergers and acquisitions in Europe over the past few years, for example the merger between Lloyds TSB and Deutsche Bank. The French market will certainly see further consolidation with the deal between Credit Agricole and Credit Lyonnais.
It is often not possible for banks to increase domestic business through acquisitions due to competitive issues. Bad performance in home markets means that some European banks now need to re-focus and tap into non-domestic markets to increase their margins.
It is therefore no surprise to see Halifax Bank of Scotland (HBOS), Royal Bank of Scotland (RBS) and HSBC putting offers forward for the German Norisbank. Norisbank is a profitable specialist in the German retail-lending arena and is currently owned by HVB Group. Other banks that have shown interest include BNP Paribas of France and BBVA of Spain.
Currently, there are some regulatory problems hindering cross-border acquisitions too, but as the integration of the European market continues, consolidation in the European banking industry will follow.
Barclays' Spanish expansion might well become the trigger for this increased consolidation, which is needed in an over branched, low margin, fragmented European banking environment.
Related research: Datamonitor, "European Retail Banks 2003" (DMFS1557)
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