Why the US banking industry may be the big opportunity right now

by Prinesha Naidoo and Joumanna Bercetche

Former Barclays Plc Chief Executive Bob Diamond sees consolidation in the world’s most-developed banking market as the biggest investment opportunity in the US. 

A string of US lenders with combined assets of more than $500 billion collapsed over 10 weeks last year, adding momentum to a long-standing trend toward consolidation in the industry. 

The strength of America’s large four banks coupled with the failure of lenders like Silicon Valley Bank makes the consolidation of the country’s regional and community banks “the number one investment opportunity in the US right now,” Diamond, now CEO at investment firm Atlas Merchant Capital, said in a Bloomberg TV interview in Riyadh Wednesday. 

Many of the roughly 4,500 regional and community banks are likely to go through a period of restructuring and consolidation with those that are “too small to succeed” likely to be acquired by stronger rivals, he said. The process is likely to take place over about two to four years and Atlas Merchant Capital is “very focused working on a number of things” in this market, he said. 

In the upcoming US presidential election, a victorious Republican Party candidate would result in “a more positive approach” to domestic regulation that could bode well for consolidation in many industries, including banking, while a winner from the Democratic Party would yield a better outlook for trade, Diamond said. Former President Donald Trump is the Republican candidate and Vice President Kamala Harris is the Democratic nominee.  

Bankers and financiers from around the world, including Citigroup Inc.’s Jane Fraser and Goldman Sachs Group Inc.’s David Solomon, are in Saudi Arabia this week for the kingdom’s Future Investment Initiative. 

Diamond said Italian lender UniCredit SpA.’s potential takeover of German rival Commerzbank AG could also pave the way for cross-border consolidation in the European banking market

“The progress we’re seeing toward the potential UniCredit acquisition of Commerzbank, in my mind, would be very positive for banking across Europe and for future opportunities in Europe,” he said. “This is an opportunity to kick start something. There won’t be an avalanche but, I think, over the next decade, we’ll see stronger cross-border banking in Europe.”