M&A is the most radical of a chief executive’s choices. A strategic control graph – with bigger and higher-valued institutions to the top and right and smaller and cheaper institutions to the bottom left – shows the eurozone’s most likely deals.
I last plotted a graph like this in 2015. A lot has happened since, so it is worth seeing how market gyrations have moved positions. It shows which big banks could get bigger and which could disappear.
Assessing the block’s top 20 biggest listed banks by tangible equity, stock market outperformance over the last three years suggests Santander, BBVA and Crédit Agricole SA (CASA) are all more likely acquirers than before – BBVA and CASA, at least, of possible targets further to the bottom left.
If one adds the equity of Crédit Agricole’s unlisted regional banks, it could do bigger deals.
Partly because of their rise, BNP Paribas, Intesa Sanpaolo and Société Générale all now look relatively less likely to acquire than before. Of these, SocGen seems a particularly unlikely consolidator today, after a period of marked share price underperformance. While other banks have settled legal issues earlier, US investigations are still pending on SocGen’s role in Libor manipulation, bribery in Libya and sanctions breaching.
