Lenders are slimming down their businesses and focusing on cost-cutting and automation, which act as drivers for sales of operations in niche markets or require a large amount of manual underwriting, he said. Already, we have seen this with foreign bank exits in Ireland, France and Spain driving ongoing M&A in the banking market," McAleese said.Īs and when they do put assets on the block, private equity firms will be natural buyers, he said.īanks increasingly do not see themselves as "full service" companies, according to Christian Kent, managing director in the financial institutions group at investment bank Houlihan Lokey. Noncore geographies, product lines and customer propositions will be either sold, wound down, or a combination of both. " We will see less externally driven restructuring of banks by regulators, and more internal restructuring where banks will continue to review their own business models. But today, the impetus to trim down comes less from a need to satisfy regulators and more banks' own concerns about their chronically low profitability. It is likely that other large European banks will be mulling sales of underperforming businesses, according to Tom McAleese, managing director and head of Alvarez & Marsal's financial services restructuring practice.įollowing the global financial crisis, the main motivation for banks to off-load assets was pressure from regulators to clean up their balance sheets and capital, McAleese said. While the business had looked like it might provide the global banking giant with a convenient foothold in the EU in the aftermath of Brexit, returns have deteriorated in recent years, with the French operations contributing a $1.17 billion pretax loss in 2020 compared to group-wide profit of $ 8.78 billion. HSBC entered the French market in 2010 with the purchase of Crédit Commercial de France for €11.1 billion, which it renamed HSBC Continental Europe S.A. A much wider pool of capital can also be drawn upon by generalist funds, should attractive opportunities arise in financial services. A total of $22.02 billion across 31 European funds dedicated to financial services was raised in 2020, according to Preqin. Portfolio deals have included both performing and defaulted loans on shipping, real estate and unsecured debt, and ticket sizes have been large - for example, the purchase of a $1 billion bundle of NPLs, many of them relating to buy-to-let mortgages, from AIB agreed in 2019.Īlthough Cerberus does not disclose how much it has available to invest in financial services, private equity firms have raised a considerable amount of money to deploy in the sector. The firm also holds equity stakes in Deutsche Bank AG, Commerzbank AG and Czech Republic-based Moneta Money Bank a.s.Ĭerberus has acquired sizeable debt portfolios from lenders such as AIB Group PLC, UniCredit SpA and CaixaBank SA, all of whom racked up large volumes of bad debts post-2008.
Promontoria MMB SAS, a Cerberus subsidiary, bought an 87.5% stake in France-based Banque Espírito Santo et de la Vénétie from Portugal's Novo Banco SA, the "good" bank that was carved out of the failed Banco Espirito Santo, in a deal that closed in December 2018, while My Money Bank SA, an independent French bank created by Cerberus in 2017, bought up Société Générale SA's Antilles-focused unit in 2020, to name just two whole-company transactions. The New York-based firm declined to comment for this story, but a glance at its transaction history shows the scale of its involvement in the banking industry as a buyer of assets when many lenders were going through an intense period of deleveraging. Cerberus Capital Management LP played a major role in relieving European banks of bad debt portfolios and underperforming assets in the years following the global financial crisis, and the private equity group's reported interest in HSBC Holdings PLC 's French retail banking arm could be a precursor to more deals involving buyout firms in the near future, industry experts said.Ĭerberus has a well-established track record of picking off European banking assets.