AMSTERDAM - Europe's broad-based "universal banks," whose global ambitions were killed by the recession of the early 1990s, are reaping the rewards of refocused strategies.
Analysts point out that the soaring trading profits at the big Swiss banks, which followed months of European currency turmoil, are being repeated across the Continent.
Part of this success has come from a quiet redefinition of the meaning of the term "universal bank."
The designation used to imply a desire to be all things to all clients - a global institution offering retail banking, insurance, securities, and investment banking services.
But as the cost of taking on the competition in home markets has sunk in, banks have pulled in their horns and are streamlining their empires to match the needs of clients.
Deutsche Bank Stands Out
A classic example of the newly refocused universal bank is Deutsche Bank of Germany.
It makes no effort to duplicate its range of domestic services elsewhere and concentrates on employing its financial might in international capital markets where it can use its balance sheet and distribution network to win lucrative business.
Deutsche Bank still provides the full range of banking services for big corporate clients, but since the recession began to bite it has tailored its operations to make better use of resources and target products it can sell to clients, analysts said.
"You develop a niche you can sell worldwide," said Roel Gooskens, head of equity research at Van Meer James Capel.
For universal banks, with their big trading operations, the strategy meant bonanza profits when Europe's currency grid disintegrated, said Lehman Brothers analyst Alison Deuchars.
"They took the proper view that they could not be in all markets, but focused on what they can do profitably," she said.
The only real exception to this rule has been HSBC Holdings PLC, the London-based parent of the Hongkong Bank Group, whose acquisition strategy in advance of the Chinese control of Hong Kong in 1997 has made it probably the only truly global bank in the world, analysts said.
Part of bankers' early reluctance to surrender the vision of a global one-stop shop for financial products was the belief that they could chain clients to their firms through sheer convenience.
No Mass Desertions
But when big banks have pulled out of a particular sector, they have not suffered the mass desertion by customers that was predicted by those opposed to the changes.
"You cannot deny that by pulling out of a business you reduce the number of products on offer, which can make it harder to attract new customers," said one senior British banker whose firm walked away from the Eurobond market in the late 1980s.
"But if you've got good relationship products, then the clients will stay."
In any case, big corporations often prefer to take advantage of the competitive market for financial services and shop around.
If there is a force for change within the universal banks, it is the organizational nightmare of melding the disparate cultures of commercial and investment banking.
Commercial and investment bankers don't think alike or look alike, and getting them to coexist is a supreme challenge.
Creating an "exploded" structure like Swiss giant CS holdings - a holding company that embraces different independent firms that cross-sell products but retain their individual cultures - is a reasonable solution, analysts said.
This may have been what Spain had in mind when five state-owned financial institutions were merged into a single conglomerate, Argentaria SA.
"Argentaria is a good demonstration of the potential for creating an umbrella structure that maximizes the benefits of providing a range of services without getting strangled by an unwieldy organization," said another analyst.