Due to inferior growth and lower profitability after the 2008 financial crisis, Ana Botn, executive chair of Spain’s Santander Group, said that the largest bank in the United States is worth what the top nine or ten European banks are.
However, credit default swaps, a sort of protection for a company’s bondholders against failure, are more prevalent at the top European banks, “which means that fixed income investors think the risk of our debt is lower than the best banks in the U.S.,” Botn said.
She argued that the recent volatility that resulted in the sale of Credit Suisse to UBS was due to mismanagement and liquidity concerns at individual banks rather than a systemic banking crisis.
“We have a highly secure position in terms of capital, liquidity monitoring, and client data safety. “But we also need a little bit more capacity to support growth so that we can be more profitable,” she said.
“In a world that desperately needs growth, we need a radical reimagining of the role of banks in that economy. Botn went on to explain that this will be a key topic of discussion at the IIF’s conference, “and finding that balance is really important between being prudent, we’re not saying that we should go back on that,” he said.
According to Davide Serra, CEO of Algebris Investments, European banks are “safer, stronger, and cheaper” than American banks because of their greater liquidity ratio (about 160% compared to 120% in the United States).
To a certain extent, American financial institutions have become more deposit base optimized. People simply want to be paid on their savings at this point, especially with the Fed [Federal Reserve] maintaining increasing interest rates. That’s why they may go to the money markets or use other methods of rearranging their funds, he said.
At the same time, citizens in the United States are getting a friendly reminder that not all banks are created equal. And don’t let the word “bank” on your sign fool you; you’re no more secure than, say, JPMorgan or Morgan Stanley.
After a string of regional bank failures this year, he predicted that the United States will see further consolidation, with “safe” institutions emerging as the winners.
“Overall, I believe the possibility is obvious. No one is moving their money out of the strong banks in Europe or the United States, despite Europe being a much more appealing place to put money. And so, after ten years of reorganization, I believe Europe is the place to be.