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Watch for the wave

M&A

Luqman Arnold

Last year went out with a bang as far as financial M&A was concerned. After a relatively uneventful 12 months, HSBC swooped on Household, and Crédit Agricole announced that it was finally bidding for the rest of Crédit Lyonnais.

Could this be the beginning of the long-awaited wave of consolidation, even cross-border consolidation, in the banking sector? As many banks struggle to maintain capital ratios in the face of a market that has dive-bombed, it would be difficult to blame the richer among them - such as BNP Paribas, UniCredito Italiano and Lloyds TSB - thinking that now is a good time to team up with a cash-strapped rival.

France is a key market to watch. If Crédit Agricole gets the go-ahead from the French regulator to buy Crédit Lyonnais, the frustration of losing out could propel BNP's chairman Michel Pébéreau into action. His target if Crédit Lyonnais were taken off the market might well be Société Générale but rumours have long swirled around a link-up between BNP and Fortis. The two held discussions last year and analysts say there's probably some logic in a Franco-Belgian tie-up particularly in businesses such as wholesale banking, mortgages and credit cards.

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