Summary
The large scale nationalization of the UK banking system leaves open the possibility for new players to enter the marketplace and compete. While American banks are still struggling en masse with capital issues, many foreign banks are not facing those same issues, and are likely to consider the UK for expansion opportunities.
Analysis
The spectacular demise of the UK banking system, highlighted by the RBS largely surrendering themselves to the government, presents an opportunity for well capitalized competitors to enter the landscape and capture market share.
The banks currently in the UK (RBS included) simply do not have the appetite or the capital for growth. Lending has been curbed, and while off-balance sheet income vehicles are still attractive, to grow those business lines requires capital and focus; neither of which are currently available to the UK banks presently on the scene.
Thus, it should come as no great surprise that a bank such as the State Bank of India, who can rely upon an enormous bank of deposits and does not have to wrestle with rehabilitation, sees the UK as a tremendous opportunity. They can enter the market with vigor, make the loans that the present banks can't or won't, and offer a host of other services with an appropriate level of marketing.
Nathaniel Finkin consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
