Who's next? That is the question on many bankers' minds as they survey the European bank-merger scene.
With Spain's Banco Santander poised to combine with Banco Central HispanoAmericano, and France's Societe Generale preparing to merge with Groupe Paribas, speculation is running high on who else is likely to tie the knot.
Among the top contenders:
Banque Nationale de Paris and Credit Lyonnais, France's third-largest bank. The French government has indicated it would not object if Banque Nationale buys Credit Lyonnais when it is privatized.
Credit Commercial de France, the country's fifth-largest bank, and Holland's ING Group or ABN Amro. Both Dutch giants have tried to enter France before.
Any combination of Spain's Banco Bilbao Vizcaya, Argentaria, and Banco Popular. All three of these banks would be dwarfed by a newly merged Santander-Central Hispano.
Though it is too soon to predict exactly who will fall into whose arms, analysts say they are certain of one thing: European banks are ready to deal.
Over the next few years, the introduction of a single currency, combined with rising competition, will force banks in continental Europe to consolidate. Though analysts do not rule out some cross-border deals, they are predicting a spate of in-country mergers, if only because cost savings are easier to achieve.
"Consolidation will accelerate in Europe," said Raphael Soifer, a banking analyst with Brown Brothers Harriman, "but the economics of in- market mergers are still far more compelling than out-market mergers."
The Spanish and French deals announced this year have intensified pressures on other institutions to join forces, analysts said, particularly in those two countries.
"The mergers have changed the competitive equation," said John Leonard, a banking analyst with Salomon Smith Barney in London.
Mr. Leonard and others said both Credit Lyonnais and Credit Commercial de France are candidates for acquisitions.
"The French government would like to have two local banks lead the European league tables, and a BNP-Credit Lyonnais deal is the only one that could be done in the private sector," Mr. Leonard said.
A similar scenario is unfolding in Spain.
"You have Banco Bilbao Vizcaya, Argentaria, and Banco Popular thinking that they're not quite as big as they used to be, relative to Santander," said Hugh Pye, a London-based banking analyst with Robert Fleming Securities. Santander would have $277 billion of assets when it completes its merger with CentralHispano, compared with $139 billion for Bilbao, $77 billion for Argentaria, and $23 billion for Banco Popular.
Analysts speculated that the most likely merger would involve Banco Popular and one of the two other Spanish banks. Somewhat less likely would be a cross-border alliance between a big German or French bank and a big Spanish bank.
The number of banks in Europe has been shrinking for several years.
According to data compiled by American Banker, the number of banking companies in France declined to eight in 1996, from 23 in 1987. Over the same period, the number of German banks declined to 32, from 42; Italian banks to 21, from 32; and Spanish banks to 10, from 19.
But the introduction in January of a single currency by the 15 member countries of the European Union will dramatically accelerate that process, according to bankers and analysts, because at a single stroke Europe gained a capital market as large as that of the United States.
That alone, bankers predict, will trigger a massive shift in corporate finance, away from bank borrowing and toward issuing debt and equity on the unified capital market. With thousands of European banks competing for business in the same currency, profits will come under pressure, forcing many to reevaluate their costs and merge.
"Introduction of the euro will change Europe more than anything else has in the postwar period," said Albrecht Schmidt, chairman of Germany's Hypovereinsbank, in a recent interview.
In Italy, another prime area for consolidation, analysts predict a big merger soon involving two of three banks-Banca di Roma, Unicredito, or Istituto Bancario San Paolo di Torino SpA. Equally possible, they said, are mergers among the country's regional savings banks.
In Germany, where corporate banking business is heavily concentrated in the hands of Deutsche Bank, Dresdner Bank, and Commerzbank, a merger between any two of the three appears unlikely, analysts said.
More likely, they suggested, is a merger between one of the Big Three and a large regional bank, such as Commerzbank doing a deal for Hypovereinsbank. Another scenario calls for two regional banks to join forces, much the way Bayerische Vereinsbank and Bayerische Hypotheken und Wechsel Bank combined into Hypovereins Bank last year.
Deutsche Bank and Dresdner Bank are also expected to continue to expand outside Germany by buying up European and U.S. investment banks or banks specializing in asset management.
In fact, German banks have already begun staking out positions in the Italy, where Deutsche acquired a 0.75% stake in UniCredito in January, adding to an already large retail operation it acquired from BankAmerica Corp. in the mid-1980s. UniCredito itself was created last year out of a $11 billion merger between Credito Italiano and UniCredito Italiano.
That merger, Mr. Leonard predicted, could trigger still another merger, between Banca Commerciale Italiana and Banca di Roma.
