IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this book

Banking Mergers and Acquisitions in the EU: Overview, Assessment and Prospects

Listed editor(s):
  • Morten Balling

Registered editor(s):
Listed author(s):
  • Rym Ayadi
  • Georges Pujals

This paper aims at providing a complete picture of banking mergers and acquisitions (M&As) in Europe during the 1990s and at offering economic evaluation and strategic analyses of the process. The main characteristics of this process in the 1990s were the emergence of " mega banks" at the national scale, a slight increase of cross-border transactions and the emergence of few large pan-European financial groups. Building on an extensive review of the US and EU literature, we examine the impact of M&As in European banking on profitability and efficiency, considering the breakdown between domestic and cross-border transactions. We first proceed with the profitability analysis of distinct completed M&As cases with different industrial strategies (based on the geographical dimension of the transaction and the initial activities of the merging banks). We find that domestic mergers contribute to cut costs for both partners, whereas, for the majority of cases studies, including domestic and cross-border mergers and acquisitions, the impact on profitability is insignificant, but a clear trend to diversify the sources of revenues was apparent. The cost and profit efficiency analysis based on 33 bank-to-bank mergers, confirmed an improvement of cost efficiency and little improvement of profit efficiency for domestic transactions; whereas, no improvement of costefficiency and a little improvement of profit efficiency for cross-border transactions. These results imply that domestic banking mergers in Europe fulfilled their objective to cut costs whereas they failed to achieve revenues synergies; cross-border mergers instead, were proved to better exploit from revenues synergies more likely due to geographical diversification. Against this background, we provide the main prospective scenarios for banking consolidation in the medium term after examining the state of concentration and competition in the domestic banking markets and the role of the regulatory changes and remaining obstacles to a full European banking integration. Finally, we raise the main strategic challenges ahead banking institutions in terms of business models - Universal, multi specialised or specialised banking, optimal size, growth strategies - M&As or partnerships - and the prospects offered by the new Basel capital Accord. A first appraisal suggests: a) a natural coexistence of different business models, each one having its specific characteristics and responding to individual needs, b) the optimal size is not synonym of a larger size and a larger size is not an absolute criterion of profitability and efficiency, c) M&As are not the only alternative to banking consolidation, and d) finally Basel II is redefining the rules of the game to European banking, but it is rather premature to make a final and exhaustive assessment in this respect.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
File Function: Main Text
Download Restriction: no

in new window

This book is provided by SUERF - The European Money and Finance Forum in its series SUERF Studies with number 2005/3 and published in 2005.
ISBN: 978-3-902109-28-6
Handle: RePEc:erf:erfstu:36
Contact details of provider: Postal:
SUERF c/o OeNB, Otto-Wagner-Platz 3, A-1090 Vienna, Austria

Phone: +43/1/404 20 7216
Fax: +43/1/404 20 7298
Web page:

More information through EDIRC

Order Information: Postal: SUERF c/o OeNB, Otto-Wagner-Platz 3, A-1090 Vienna, Austria

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

in new window

  1. Sharpe, William F., 1967. "Portfolio Analysis," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 2(02), pages 76-84, June.
  2. Resti, Andrea, 1998. "Regulation Can Foster Mergers, Can Mergers Foster Efficiency? The Italian Case," Journal of Economics and Business, Elsevier, vol. 50(2), pages 157-169, March.
  3. Altunbas, Y. & Gardener, E. P. M. & Molyneux, P. & Moore, B., 2001. "Efficiency in European banking," European Economic Review, Elsevier, vol. 45(10), pages 1931-1955, December.
  4. Peristiani, Stavros, 1997. "Do Mergers Improve the X-Efficiency and Scale Efficiency of U.S. Banks? Evidence from the 1980s," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(3), pages 326-337, August.
  5. David C. Wheelock & Paul W. Wilson, 1995. "Evaluating the efficiency of commercial banks: does our view of what banks do matter?," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 39-52.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:erf:erfstu:36. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dragana Popovic)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.