Foreign Banks Rethink Plans for U.S. Market
Kraus, James R., American Banker
Foreign Banks Rethink Plans For U.S. Market
With costs and problem loans on the rise, many foreign banks are beginning to rethink their operating strategies in the United States - so much so that the topic came up at the International Monetary Conference in Osaka, Japan, this week.
"As they recognize the new circumstances, foreign banks will reduce their presence in the U.S. market," First Chicago Corp. chairman Barry Sullivan told the group, adding, "Many will leave altogether."
While foreign bankers deny they are abandoning the United States, it's clear that some retrenchment is taking place.
Japanese banks, hit by sagging profits and fluctuating capital ratios, are drastically reducing new lending, chasing higher margins and fee income instead.
British and Irish banks, finding the United States a riskier place than they had imagined, have trimmed ambitious plans to become regional consumer banking powerhouses.
Playing It Safe
Other European banks are sticking to what they do best. They are expanding only in specialized areas where they believe they have a market advantage, such as private banking, trade and commodity finance, asset management, or securities custody.
Meanwhile, Canadian banks are playing safe and holding U.S. lending to current levels. They remain keen to acquire U.S. institutions but only at bargain-basement prices.
"Foreign banks have concluded that, if they can't make money, they may not be able to afford the luxury of staying on here forever," said County Natwest analyst Steven Berman. "They have their own needs at home. Only a few are seriously looking to expand their businesses here."
Exploiting an Opening
Among the exceptions are the better-rated, strongly capitalized European banks like Union Bank of Switzerland, Britain's Barclays Bank PLC, and Holland's Rabobank Nederland, which are using the opening afforded by tighter lending practices at U.S. banks to build relations with big U.S. corporations.
Yet after more than a decade of unfettered growth, many foreign banks are clearly in a defensive mood.
"I'm not very comfortable with participation banking," said John Tugwell, chairman of National Westminster Bancorp., the U.S. holding company for Britain's National Westminster PLC.
When buying a piece of another bank's loan, Mr. Tugwell pointed out, it can be difficult to know your customers and work your way out when you've got problems.
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