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Also shortlisted in this category: |
Look at any of the largest banking franchises and it’s easy to pick holes in their businesses. Take the biggest of them all, Citi: a firm that seems to do well everywhere it operates, but at the same time has frustrated countless talented managers as they attempt to control the sheer scale of its operations.
Or HSBC, which excels in so many areas but has noticeably failed, so far, to make inroads in the two markets it has most urgently targeted: the US and global investment banking.
Then there’s JPMorgan Chase: many of the numbers look good but a sense persists that it, in combining, two great firms have lost their identity and are still searching for a new one.
Deutsche Bank is a trading and capital markets powerhouse with a domestic banking base that often seems more of a hindrance than a help. The two UK challengers, Barclays and Royal Bank of Scotland, have admitted that their global plans fall short with their tussle for control of ABN Amro. Alessandro Profumo has transformed UniCredit, but the integration of HVB is not fully settled and its merger with Capitalia creates the possibility of too many tensions in too short a space of time.
Then there’s the bank with the most gaping hole of all: Bank of America. In a world where globalization is the buzzword, BofA seems like a relic of the past. It generates 90% of its revenues in its domestic market, and yet continues to buy (or at least in the case of LaSalle try to buy) businesses in the US.
So why on earth is Bank of America Euromoney’s choice as the global bank of the year?
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Ken Lewis: likes to be able to look shareholders in the eye |
The answer is simple. Since Ken Lewis ascended to the CEO position at Bank of America in 2001, the bank has set out a strategy, followed it, never deviated from it, achieved much of what it wanted to achieve and created a platform to move to the next level. Which other CEO of one of the world’s 10 largest banks could claim that?
The core of Bank of America’s strategy is to be the number one bank in its domestic market. It has achieved this through key acquisitions. These include Fleet, which gave it access to the northeastern market, and MBNA, which provided a leading credit card issuer at home and abroad.
LaSalle will give the bank access to the last piece of the US banking puzzle that Lewis and his team want – the Chicago area. Then the bank will be forced to concentrate on organic growth, as it will soon breach the 10% threshold set for market share of deposits by US regulators.
What next? Bank of America insiders say that Ken Lewis wants to be remembered not just as the man who made Bank of America the leading bank in the US, but also as the man who took the firm global.
Lewis’s record of buying plugs for the holes in his ship would suggest a round of international acquisitions. Rumours have been rife for some time that he would target Barclays – which would be a good fit for both the retail and investment banking operations – even before Barclays became embroiled in the ABN saga.
Where Lewis is concerned, nothing can be ruled out. But Lewis is firm, in public at least, that he does not believe skills in US consumer and commercial banking are easily transferable elsewhere; and, in any event, the high ratings of European banks, combined with the weakness of the dollar, could make any strategic fit economically prohibitive.
Instead Lewis is looking for three areas for international growth: minority stakes in leading emerging market bank franchises such as Itaú in Brazil, Santander Serfin in Mexico, and China Construction Bank in China; growing the international side of BofA’s credit card business, where it is already the leading card provider in Europe through MBNA; and building a powerful investment banking franchise, which Lewis hopes will be one of the top five global firms in the years to come.
It’s a lofty ambition, and one that could be achieved at a stroke with a transformational bid for one of the big Wall Street securities houses. But Lewis likes to be able to look shareholders in the eye. He’ll be prepared to take the long road if necessary.
What’s no longer in doubt, it seems, is his commitment to this side of the business. Insiders say BofA would like to grow international revenues to 20% of earnings in the next five years. That’s still a low level compared with some. But 20% of a business that already has a market cap of nearly $250 billion, and expects to grow its earnings in core domestic markets by at least 6% to 9% per annum, is a sizeable international business by anybody’s standards.
