THE PROPOSED MERGER between JPMorgan and Bank One has forced every bank CEO in Europe to reconsider strategy. They have a choice – to bulk up now and try to get too big for a US bank to easily buy them, or to fizzle out, either by waiting to be bought by a bigger firm or by accepting a smaller and smaller share of corporate and capital markets business.
The other strategy they can pursue is to try to make acquisitions in the US, but few have the balance sheet strength or the business model to make that a realistic goal – and the precedents are not encouraging.
Faced with this do-or-die dilemma, most seem to have decided to do nothing. As one global head of the financial institutions group (FIG) at a leading investment bank says: "If you think about the JPMorgan/ Bank One deal, in what way does it affect Europe? In no way."
In the short term, and on an operational level, this might be true. But in the long term, the growing size of US banks is alarming. "American banks are becoming really big," says Michael Esposito, managing director of FIG at Goldman Sachs.