Dhe Wall Street banks appear to be restricting lending in Europe. The corona crisis is forcing large American money houses to focus on their home market, seven people familiar with the matter told Reuters. This “America first” strategy creates scope for BNP Paribas and other European financial institutions to secure additional market shares.
Because of record-high credit demand and pressure to support the local economy, houses like Bank of America and JP Morgan have become more cautious in Europe, insiders said. Goldman Sachs, Morgan Stanley and Citigroup are also risk-averse in Europe, fearing a wave of loan defaults. The American money houses, however, do not withdraw completely from Europe, but are still active in individual deals.
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The American banks are currently more busy with their domestic corporate and private customer business, so they are more careful in Europe, said Guido Zoeller, head of Germany at the French bank Société Generale. Employees of American banks, who did not want to be named, said their European competitors could afford to be more aggressive in lending because they could refinance themselves cheaply with the European Central Bank (ECB).
The banks declined to comment.
The withdrawal of the Wall Street giants is a turning point. Since the financial crisis in 2008, they have continued to expand their market shares in Europe and have taken the top positions in the rankings. Thanks to the booming American economy, higher interest rates across the Atlantic and low taxes, JP Morgan & Co made billions for years and hurried from one record profit to the next. Its European competitors, on the other hand, suffered from the aftermath of the financial crisis, the European debt crisis and the loose monetary policy of the ECB.
American banks in Europe have lost ground in the ranking lists of data providers such as Refinitive. The top eight banks in syndicated loans are all Europeans this year. Bank of America – still number 1 last year – came in tenth with loan commitments of $ 6 billion. JP Morgan is the best-placed American bank in ninth place, after seventh in the previous year.
The French financial institutions BNP Paribas, which comes first in the refinitive rankings, Societé Generale and Credit Agricole as well as the Spanish Santander and the Italian Unicredit are breaking into the breach.
Despite the drop in oil prices, BNP Paribas is providing a $ 10 billion line of credit for British oil company BP – single-handedly. It is unusual that with such a large sum, the risk is not shared between several banks.
French banks are also under pressure to grant urgently needed loans to domestic companies. But they have the political backing to expand abroad. In addition, because of their high liquidity, French banks are less affected by the crisis than other European credit institutions, said one of the insiders.
BNP Paribas is seen by many as one of the banks that has come through the 2008 financial crisis comparatively well. It has its risks and costs under control and is therefore one of the winners of the crisis. “The French banking system is considered the most active and solid,” said a banker in Paris.
Banks around the world have seen tremendous customer demand for credit. Corporations have drawn more than $ 150 billion in credit lines to weather the corona pandemic standstill. This has a negative impact on the balance sheets of the banks, which have had to make billions of provisions for possible losses and in some cases have experienced significant drops in profits.
The bleak outlook and diverse government aid programs in the United States and Europe have increased pressure on institutes to focus on clients in their home markets and to use government guarantees to save businesses. In this crisis, banks would have to comply with the interests of their own governments, said a banker from London. This nationalism presented the institutes with difficult decisions, since the demand for liquidity was also enormous abroad.
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