Wednesday, February 21

European banks are leaving the U.S. financial markets: the reasons

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U.S. financial markets are no longer interesting for European banks

Banks from Europe are leaving the U.S. financial markets. The reasons are the record reduction of interest rates, as well as increased competition from local financial institutions.
Despite the fact that European banks have been present in the U.S. retail sector for a long time, now many have decided to leave the country. Meanwhile, over the past 40 years, financial institutions in Europe have actively invested billions of dollars in the U.S. market, but this strategy is not appropriate for the current situation.
HSBC of Great Britain, one of the largest banks in the world, was the first to announce its decision. It entered the U.S. retail market in the 1980s, and a few months ago announced plans to end such activities in the country. This action was forced by the financial conglomerate after the pandemic and declining interest rates. It is worth noting that HSBC operations in the U.S. had losses even before the pandemic. For example, in 2018, the bank’s losses amounted to 182 million dollars, in 2019 – 279 million, and in 2020 – 518 million dollars. In 2011, there were 470 HSBC branches in the country, but now there are only 150.

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Some experts attribute the failures of the British bank in the U.S. difficulties in implementing a digital platform that is primarily aimed at customers who represent the Chinese and Indian diasporas. In addition, the institution at some point became extremely difficult to scale business in the country. Now HSBC has chosen a different direction – it is expanding its position in the Asian market, and this requires funds, which they want to obtain by leaving the American segment.
Following HSBC, BBVA Bank of Spain plans to leave the U.S. market. He signed a deal with the U.S. corporation PNC for the sale of 637 branches. The amount of acquisition of offices is 11.6 billion dollars. Initially the BBVA representatives noted that they came to the U.S. market hoping for simplified conditions for business, as well as a favorable tax climate. However, after a while the bank noticed that operations in the country require adherence to strict rules, which is not always advisable, because it requires large expenditures. Therefore, the BBVA management decided to sell their business in the country, after which the value of the shares of the institution increased by 15%.
Spanish Santander, after being accused of giving loans to poor people, who originally could not pay on the loan, also announced a revision of the principles of doing business in the United States. However, so far the bank has no plans to leave the market of the country.

 

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