The U.S. asset totals at some big European banks surged to new highs last year even as some beleaguered Japanese banks reduced their holdings in this market, according to an American Banker survey.
Among the big increases: France's Societe Generale increased its U.S. holdings by 46%, to $52 billion; Holland's ABN Amro added 32%, for a total of $61 billion; and London-based HSBC Holdings PLC increased its U.S. assets by 37%, to $39 billion.
"The United States is the part of world where there is indeed money to be made and there is a potential for growth and diversification," said Serge Bellanger, executive vice president and general manager at Compagnie Financiere de CIC et de l'Union Europeene.
Many European banks have limited potential for growth and very low profitability in their home markets, he added.
Moreover, the recent economic downturn in Asia, he said, has only reinforced the attraction of the U.S. market for foreign banks.
By contrast, Sumitomo Bank Ltd.'s U.S. assets fell 4%, to less than $30 billion, and Industrial Bank of Japan Ltd. cut its U.S. assets by 13%, to $27 billion. Bank of Tokyo-Mitsubishi Ltd., the foreign banking company with the largest presence in the United States, added just 3% to its assets here, for a total of nearly $84 billion.
"Japanese banks are clearly under pressure to meet Bank for International Settlements capital guidelines, and reducing assets is one of the easiest ways," observed Mark Gross, managing director at Fitch IBCA Inc.
At least part of European banks' increase in U.S. assets came through acquisitions.
HSBC Holdings, the fifth-largest foreign bank operation in the United States, bought First Federal Savings and Loan Association in Rochester, N.Y., adding $7 billion of assets to its Buffalo-based Marine Midland banking unit.
Among other large deals, ABN Amro bought Standard Federal, a $15 billion-asset, Troy, Mich.-based thrift. And National Australia Bank, last fall struck a deal to buy Homeside Inc., one of the largest mortgage banks in the country, after earlier buying $9 billion-asset Michigan National Corp.
However, one of the biggest reasons for the U.S. asset surge at major European banks came from a buildup of investment banking operations and, especially, trading-related assets.
"A significant amount of the increased activity has been in the securities area," remarked Lawrence Uhlick, executive director and general counsel of the Institute of International Bankers, a New York-based association of foreign banks operating in the United States.
"I would expect that trend to continue," he said.
Others sounded a similar note. "An awful lot of banks want to be global investment banks," said Mr. Gross, the Fitch executive. "If you want to do that, you need a presence in the United States, which has the largest capital market in the world."
In fact, big European and Canadian banks are giving top priority to trading- and securities-related operations such as underwriting and distribution-a major shift from their traditional focus on commercial banking activities such as lending.
Last year alone, for example, Canadian Imperial Bank of Commerce acquired Oppenheimer & Co., Swiss Bank Corp. bought Dillon, Read & Co., and ING Barings acquired Furman Selz LLC.
"There will be more acquisitions," predicted Guy Manuel, managing director at CBM Group, a New York financial consulting firm.
"European banks, in particular, need U.S. financial expertise in areas like high-technology companies," he said, "and many have concluded that building up their investment banking capabilities internally is very difficult."
Still, analysts and bankers warned that the current rapid increase in securities-related activities at foreign banks is not without dangers.
"It's not a risk-free strategy," Mr. Gross observed. "You can hire a lot of people or buy an existing institution, but you still have to create a culture and keep the people."
"Your strategy has to be right," said Mr. Bellanger of Compagnie Financiere de CIC; "you have to be patient and at the same time capable of moving quickly; and you need diplomacy and vision in order to run a global bank.
"How many banks have all of that?"
