The foreign debt crisis could shake up the market for U.S. bank mergers by scaring off some buyers — and opening the door to others.

The crisis is forcing European banks with big U.S. operations to reassess them, observers said. Other European players that have little or no presence here will shy away from the U.S. market for the foreseeable future, they said, making room for Asian, Australian and Latin American banks.

"The stronger banks are feeling that this is kind of a once-in-a-generation opportunity to take advantage of the dislocation," said Joseph Moeller, a managing director at KBW Inc.'s Keefe, Bruyette & Woods Inc. "There is somewhat of a new crop of foreign banks that are sizing up the United States. All things being equal, the European banks have a little bit more on their plates right now," but "just because there are problems with Europe and the euro doesn't mean everybody can't do anything."

With Europe reeling, banks from other countries are making more moves in the U.S. A subsidiary of National Australia Bank bought most of the loans and deposits of a troubled Nebraska bank Friday. Last month, South Korea's Woori Finance Holdings Co. invested more than $200 million in Hanmi Financial Corp., the parent of a Los Angeles bank. Moeller said he is also hearing more talk from Latin American and Chinese banks.

Meanwhile, European banks with a small presence in the U.S. are retrenching. Allied Irish Banks PLC has said that it plans to sell its minority stake in Buffalo's M&T Bank Corp., and a subsidiary of Portugal's Banco Comercial Portugues SA recently agreed to sell 17 U.S. branches.

If a European bank is not here already, U.S. deals are off the table, experts said.

"The U.S. market, it's really uncertain right now," said Christopher Nolan, an analyst at Maxim Group. "I don't see it being a compelling market unless you already have a presence here and you are looking to leverage that presence."

A handful of European banks are in that position, though their future here is uncertain. Six of the 25 largest U.S. banks — holding $804 billion of combined assets — are controlled by European institutions.

The largest is HSBC North America Holdings Inc., a New York division of London's HSBC Holdings PLC, followed in size by Royal Bank of Scotland's Citizens Financial Group Inc.

The two seem to have taken different tacks in the U.S. lately. HSBC was in a holding pattern before the debt crisis, saying it wouldn't open any more branches in the U.S. for the time being and wanted to focus on emerging markets. RBS, meanwhile, in recent months unveiled an ad campaign for Citizens and said it wants to expand in the Southeast.

Also, Spain's Banco Santander reportedly sought to merge its U.S. arm, Sovereign Bank, with M&T, although the talks fell through.

Brian Sterling, co-head of investment banking at Sandler O'Neill & Partners LP, said every European bank is taking stock of where it is going in the U.S.

"I think of it as capital management. Capital is sparse, so you put it to the places where it has the most impact, which tends to [mean] putting it into your core businesses," he said. "[T]he non-U.S. players [from Europe] will be more selective. I don't think you'll see new entrants. Some will stand pat where they are."

Market conditions are not ripe for any of these companies to sell their U.S. divisions. Prices are depressed, and there are too few capable buyers. So that means they may have to sit on their hands or position themselves for a sale or expansion.

"[S]ome people may say, 'Look, our franchise in the U.S. is noncore, … and therefore let's try and sell it if we can sell it," Sterling said. "I think we'll see that as well … as pricing starts to firm up."

There are strong incentives to stay committed. The U.S. economy, troubled as it may be, is still among the healthiest in the world, which is reflected in the dollar's strengthening against other currencies in recent weeks, market watchers say.

Most analysts say the U.S. banking market is poised for a massive merger wave as soon as the economy improves, which could be lucrative for companies with a footing here.

William Hickey, a co-head of investment banking at Sandler O'Neill, said the strong allure of the U.S. may persuade Europeans that are here already to keep investing in their U.S. operations.

"There is a chance to get a sizable operation. They've already demonstrated that they're interested in this type of market," he said. "There is less tumult here than in Greece."

Bert Ely, the president of Ely & Co. in Alexandria, Va., said he is skeptical that European banks could make any big move in the U.S. right now, even if they wanted to do. "Supervisors are going to have concerns," he said.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.