The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site. Please see our Subscription Terms and Conditions.


All material subject to strictly enforced copyright laws. © 2021 Euromoney, a part of the Euromoney Institutional Investor PLC.

Squeezing the bank balance sheet from both sides

Ever on the look-out for new and lucrative corners of the capital markets, many firms have identified what is often called capital management as a promising niche. At its most respectable, this business consists of advising banks and other companies on how to measure and manage the true economic risks of their activities. More often than not, however, it is about cold-calling bank treasurers and trying to sell them ideas for complex deals. Michael Peterson reports

Lately, European bank treasurers have been receiving a lot of suggestions for deals designed to improve their return on capital.


       

They should be receptive to these ideas - even if they balk at the fees being asked - because they are under growing pressure to improve return on equity.Of course, banks can do this by cutting costs or improving their lending practices, but a bit of financial jiggery-pokery helps as well. With a collaterallized loan obligation here and a hybrid tier-one deal there, banks have found that they can squeeze an overweight business into a slim-line balance sheet.


Pressure to improve returns is coming from equity investors that have grown tired of accepting single-digit returns on their investments - especially if they now have a whole eurozone full of alternative assets they can buy. "Investors are forcing European banks to improve returns on equity just at the time their cost of funding is rising because they are starting to lose cheap deposits," points out Oldrich Masek, head of financial institutions structured finance at JP Morgan in London.




You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.

SUBSCRIBE ONLINE TODAY

Unlimited access to Euromoney.com and Asiamoney.com

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually

FREE 7 DAY TRIAL

Unlimited access to Euromoney.com and Asiamoney.com, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors

LOGIN NOW

Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree