While it would be impossible to rule out a mega-deal, we are likely to see a few headline-grabbing transactions in the banking and capital markets sector in the near future.
Domestic consolidation and expansion in niche markets are likely to continue to dominate activity. Indeed, the relatively large number of bank competitors in leading markets—including the US, Italy and Germany makes further consolidation at the domestic level almost inevitable. Domestic acquisition can be easier to justify to investors than cross-border deals. In particular, the proximity of operations and the similarities in customer profile tend to increase the potential for synergies, cost savings and cross-selling.
However, markets like Spain, France and the UK are already relatively concentrated. While there is still room for some in-market consolidation, leading institutions are increasingly looking to expand abroad. In particular, several European banks have been steadily expanding their presence in the US to take advantage of the high economic growth there. Their strategies are often characterised by relatively small scale, though cumulatively significant, incremental expansion.
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