Another article in the Wall Street Journal Wednesday on page 1 of section C. It accuses Sovereign of all kinds of things not in the best interests of shareholders. To me they sound much worse than anything NPK management ever did. I understand you don't own Sovereign and I think they bailed you out of the smaller bank at a high price that may not be justified. I would like to get your take on this.
The banking industry is led mainly by people who fear for the loss of their redundant jobs. Bank CEOs have more to worry about than tellers, who are always in demand.
I have no doubt that almost every bank merger or takeover is driven by people protecting their jobs as much as enhancing profit opportunities.
But so what? The banking business in this country is divided among the huge banks with branches everywhere -- Citicorp and perhaps Washington Mutual and others -- regional banks -- SOV -- sub-regional -- Independence -- and local banks -- Brooklyn Federal.
As a result of the emergence of secondary markets for virtually every form of loan extended by banks, combined with the huge impact of technology, as well as the repeal of restrictive banking laws, there is no longer any reason for the existence of 9,000 domestic banks and 2,000 thrifts in this country. Meanwhile, there are 9,600 credit unions, some quite large, in the US.
Canada, for instance, has a mere six banks serving its 33 million citizens. That's it. Using the population as a measurement, if the US followed Canada's model, 50 to 55 banks would operate here. Eventually, our banking industry will shrink -- in number -- to something a lot closer to that figure. I think Japan has 150 banks serving a population less than half the size of the US.
The banking industry is a collection of fiefdoms with managements fretting about takeovers. Because the industry is rather collegial, takeovers aren't generally hostile. Everyone knows what's happening and everyone is willing to extend a little goodwill to close the deals.
As for SOV and empire building, well, what's wrong with Santander building an empire? Keep in mind, as Santander grows, it becomes more attractive to yet larger acquirers.
There's no escape in banking. If an operation is profitable and well run, it is a good target. If it is a crumbling mess, it is a good target. There's a buyer for every bank in the world, and those buyers are looking over the financials of their targets every day.