(4 March 2020 – Europe) After deploying billions in funds to break into the US investment banking market, many European banks are beating a hasty retreat.
HSBC is closing one third of its branches after admitting the division is lossmaking. Its US trading business is set to experience deep cuts also with assets as measured by risk to be slashed by 45 percent after profits from the US markets business fell by more than 20 percent in 2019.
Last year Deutsche Bank walked away from its global equities business, cutting thousands of jobs, while UBS cut back much of its US bond trading business after the global financial crisis in 2008. Credit Suisse is also a much smaller force in the US, having pared back its investment bank and leaving US private banking in recent years.
The cuts represent a dramatic retreat from the two decades when European banks went on an acquisition spree in the US in a bid to capture part of the world’s most lucrative banking and trading markets. The sharp cuts are a recognition that few European banking outfits have founded strong businesses in the US. “We do not see European bank management creating value to their shareholders with US operations and would welcome exit strategies” says JPMorgan Head of European Banks Analysis, Kian Abouhossein.
“I’m not sure any large British bank and maybe no European bank has ever made money over a couple of credit cycles in the US market” stated former Bank of England (BoE) Deputy Governor Paul Tucker.