Newspaper article The Evening Standard (London, England)

Pressure Is on as Commercial Banks Flex Muscles

Newspaper article The Evening Standard (London, England)

Pressure Is on as Commercial Banks Flex Muscles

Article excerpt


DUTCH telecoms group KPN this week launched a e5 billion ([pound]3.1 billion) share offering, one of the largest ever seen in Europe. The deal was run by eight banks.

Eighteen months ago, the City would have expected a transaction of this size and prominence to have been run by Goldman Sachs, Merrill Lynch or Morgan Stanley with perhaps a Dutch bank in the background for the sake of protocol.

But the three bulge-bracket houses were nowhere to be seen.

The syndicate was led by ABN Amro and Deutsche and the other underwriters were Bank of America, CSFB, JP Morgan, ING, Rabobank and Schroder Salomon Smith Barney. The choice highlights what some are calling a seismic shift.

Commercial banks are increasingly flexing their muscles.

Alongside KPN's hefty demand for equity came a request for e2.75 billion of debt, willingly supplied by the same eight banks that underwrote the share offering.

In the past, commercial banks would have been happy simply to provide the comparatively unprofitable loan and leave the high-profile, high-earning securities deal to the investment bank professionals.

The demise of the Glass-Steagall Act, which prevented US commercial banks from owning investment banks, has changed that.

Equally significant is the increasing confidence of European firms with investment banki * g s u b s i d i a r i e s . S i n c e Glass-Steagall was abandoned, Citibank has bought Salomons and Schroders and Chase has bought JP Morgan. Over the same period, the likes of Deutsche and UBS have become far punchier.

These firms routinely tell corporate clients they will only lend them money if they can have a slice of their securities or advisory business as well. The banks know they can do this because pure investment houses do not have the assets to provide large companies with large loans. …

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