European Banking’s Moment of Merger Truth
Like the 2008-09 financial crisis, which left European Banks saddled with excess capacity, diminished profitability, and tarnished reputations, the COVID-19 pandemic is forcing another sweeping change in the industry. This time, however, the industry's biggest problem is not "too big to fail," but rather "too slow to adapt."
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BARCELONA – The days when bankers could pay 3% interest on their customers’ deposits, lend at 6%, and make it to the golf course by 3 p.m. (the “3-6-3 rule”) are long gone. While some bankers remain oblivious to the looming threats to their business, the fact is that banks are now in dire straits, judging by their dismal valuations (in terms of price-to-book ratios) and low current and expected future profitability.