U.S. banks are making a major return to the international banking scene. says Serge Bellanger, executive vice president and general manager of Compagnie Financiere de CIC et de l'Union Europeene in New York.
"Only two years ago, the role of U.S. commercial banks in international banking seemed to be diminishing, both in absolute and relative terms, but now that picture is changing," Mr. Bellanger concluded in a recent assessment published in the latest edition of The Bankers Magazine.
"During 1992 and continuing into 1993," Mr Bellanger added, "U.S. banks have been reclaiming lost ground in international banking."
|Decidedly Different' Era
The French banker noted that many of the largest U.S. banks were forced to consolidate their international activities because of balance sheet constraints, including problem cross-border and real estate loans and loans for highly leveraged transactions that ran into difficulties.
"The current environment looks decidedly different," Mr. Bellanger observed.
"In recent months, U.S. banks have put their problems behind them while banks elsewhere are struggling."
"Japanese banks have had to limit their international growth in order to meet the capital requirements proposed by the Bank for International Settlements and to cope with the collapse of the Japanese stock market and real estate markets."
In Europe, meanwhile, "the recession has led to a pulling back from international activity."
The retrenchment by Japanese and European banks is already being felt through a decline in business lending by foreign banks, Mr. Bellanger noted.
He noted that according to a recent analysis by First Boston Corp., new business lending by foreign banks totaled $29 billion in 1991 but only $8 billion in 1992.
"In the fourth quarter of last year, business loans by foreign banks in the U.S. fell by $3 billion, the first decline in nearly three years."
He added there is good reason to believe that U.S. banks may be returning to a leadership role in international banking.
"European banks played a dominant role early in this century," he remarked.
"But after World War II, the unchallenged economic power of the U.S. was paralleled by a dramatic growth in the international activities of U.S. banks."
Mr. Bellanger suggested U.S. banks may now be poised to return to playing "a leading role in international banking, not only in terms of their level of activity,
but also in the creativity they provide."
"Right now, it appears that the U.S. role [in banking and financial services] is growing," he said.
"It may never return to the glory days of the 1960s and 1970s, but it will be much more impressive than it was in the recent past."
The French banker noted that the U.S. is now emerging from a major recession as Europe and Japan are continuing to undergo massive economic strain.
"The problems and uncertainty in Europe are paralleled in Japan where both the political and economic systems are undergoing wrenching changes," he observed.
"Even if the stock market and real estate markets recover from their deep declines, Japan must deal with critical fundamental problems," he said, such as an aging population with its rising social costs and growing competition from neighboring countries that have lower production costs.
"The prospect of slow growth in these markets will have a great impact on the growth of international banking," Mr. Bellanger said.
With lending by banks likely to be constrained, many corporations will instead place a renewed focus on raising equity capital from foreign direct investors.
"Commercial banks will have a role to play in the emerging markets, but this role will not be on the scale that both lenders and borrowers envisioned during the 1970's," he predicted.
"Bankers must fine-tune their international activities and narrow market segments to those in which they can play a meaningful role," he added.
