President Trump called tariff "the most beautiful word in the dictionary".

In this episode, we look at what America imports, and from where.

Canada, Mexico, China and the European Union are the biggest exporters to the US.

How will tariffs impact the US economy and that of its trading partners?

And how can other countries fight back against Trump's tariffs?

The data discussed in this episode mainly comes from https://oec.world/en/profile/country/usa 

There's a consensus that European banks need to consolidate.

But the concentration at the national level has already gone up significantly over the past 10 years.

In most EU countries, the five largest banks now control more than 70% of the market.

Mergers have never stopped. That's true for large banks (e.g. UBS - Credit Suisse) and for specialized banks.

As a result, the European banking market is already quite consolidated.

A report for the European Parliament shows that banking remains dominated by national champions, especially in the large countries.

But the authors don’t identify the real culprits behind the failing Banking Union.

Read the full report here: https://www.europarl.europa.eu/thinktank/en/document/IPOL_STU(2024)760272

Topics discussed in this episode:

In the euro area, the banking market is dominated by domestic groups in the large countries (Germany, France, Italy, Spain, the Netherlands).

In smaller countries, the share of foreign banks is much larger.

There was a lot of M&A of European banks up until about 2010. Since then, M&A has been much lower and more focussed on domestic consolidation.

The report blames low valuations of banking stocks for the lack of pan-European banks.

However, the title "the long wait for cross-border integration" implies that politicians have "done their part" in creating a Banking Union, and bankers have failed to deliver on the vision of the EU's policy makers.

In reality, further European consolidation of banks was/is harmed by low economic growth, negative interest rates, government ownership, and hostility to foreign acquisitions.

Europe is flooded by American tourists.

Is it because of the strong dollar? 

No.

I argue that higher deficits in the US are a major part of the reason why Americans are richer than Europeans.

(This episode was re-recorded for better sound quality)

The war in Ukraine, the rise of China, economic stagnation, and deteriorating relations with Africa are some of Europe’s most pressing geopolitical challenges.

In this episode, I talk about how banks reflect these geopolitical shifts.

Until the 2022 invasion of Ukraine, EU politicians and bankers treated Russia like any other Central and Eastern European country. Banks like UniCredit, Raiffeisen Bank International, Société Générale and others had significant subsidiaries in Russia, just as they had in e.g. the Czech Republic, Poland or Bulgaria.

Vice versa, Russian banks did business in Europe.

However, since the invasion, all but one Russian bank in the EU have been forced to shut down. In contrast, European banks continue to operate in Russia, to the chagrin of European and American officials.

As the visit of Xi Jinping to Hungary and Serbia demonstrates, good political relations and Chinese investment go hand in hand. Usually, the larger a country’s GDP, the more foreign banks it attracts. But although Hungary has a small economy, it has more Chinese banks than e.g. Austria, Sweden or Romania.

Macron talked about the need for cross-border consolidation of European banks. It’s easy to suspect ulterior motives, as BNP Paribas and Crédit Agricole are well placed to buy foreign competitors. But given the single European market, the dominance of local banks in the biggest euro countries doesn’t seem right.

Finally, as France’s military and political power in Africa wanes, French banks have been selling their African subsidiaries to local banks.

Future episodes will be about how to sell SocGen, the effect of higher interest rates, and the frozen Russian central bank assets at Euroclear.

Transcript at https://blog.janmusschoot.be/2024/06/10/putin-xi-macron-how-geopolitics-shapes-banking/

In this episode, I tell you why higher interest rates will make 2023 the most profitable year ever for euro banks.

If you're listening to this in 2024, I predict on 16 April 2023 that:

1) some banks are trading at less than 4 times their 2023 profit
2) SocGen will make a profit in France (according to the country-by-country report)
3) Irish banks AIB and Bank of Ireland will double their annual profit (i.e. 2023 profit vs 2022 profit)
4) 2023 will be the most profitable year ever (measured in return on equity monitored by EBA)

Links discussed in this episode:

Euro area statistics: https://www.euro-area-statistics.org/

EBA risk dashboard: https://www.eba.europa.eu/risk-analysis-and-data/risk-dashboard

I discuss what's going on with the rescue of Credit Suisse.

Also the situation in the US with SVB and First Republic Bank. 

Finally, some thoughts on euro area banks.

European bank stocks dropped a lot on 15 March 2023, in the aftermath of the failure of Silicon Valley Bank (SVB). Credit Suisse is down 25%, other European banks are down more than 10%.

Should you be worried? I explain why European banks don't have the same issues as SVB (more stable deposits, less bonds).

However, the liquidity position of European banks has gone down a lot since September 2022. That's because banks have repaid TLTRO loans to the ECB.

Further reading/watching:

https://www.positivemoney.eu/2022/12/banks-windfall-profits/

https://youtu.be/1FIOazUxt80

https://twitter.com/JanMusschoot/status/1635948354436726786

Warren Buffett once said: "Only when the tide goes out do you discover who's been swimming naked."

With inflation going over 10%, clearly the ECB was exposed as a "naked swimmer" in 2022.

But inflation wasn't the only tide that went out for the European Central Bank.

I also talk about the ECB's faulty risk management, and Lagarde's lack of leadership...

HSBC sells its Canadian subsidiary to RBC. That makes sense, as HSBC was only a small bank in Canada.

Although Canada was just 3% of HSBC's global operations, the sale brings in $10 billion. That's about 8% of HSBC's market cap!

HSBC should use this money to gain market share in its core regions.

By buying Standard Chartered, HSBC can strengthen its position in Asia.

Acquiring NatWest (RBS) would make it the largest retail bank in the UK.

But the cheapest option is something you might not expect...