British and German Banking Strategies

305 Pages·2009·1.987 MB·English

by  Sven Janssen (auth.)

Palgrave Macmillan Studies in Banking and Financial Institutions
Series Editor: Professor Philip Molyneux
The Palgrave Macmillan Studies in Banking and Financial Institutions are inter-
national in orientation and include studies of banking within particular coun-
tries or regions, and studies of particular themes such as Corporate Banking, Risk
Management, Mergers and Acquisitions, etc. The books’ focus is on research and
practice, and they include up-to-date and innovative studies on contemporary topics
in banking that will have global impact and influence.
Titles include:
Yener Altunbas˛, Blaise Gadanecz and Alper Kara
SYNDICATED LOANS
A Hybrid of Relationship Lending and Publicly Traded Debt
Yener Altunbas˛, Alper Kara and Öslem Olgu
TURKISH BANKING
Banking under Political Instability and Chronic High Inflation
Elena Beccalli
IT AND EUROPEAN BANK PERFORMANCE
Paola Bongini, Stefano Chiarlone and Giovanni Ferri (editors)
EMERGING BANKING SYSTEMS
Vittorio Boscia, Alessandro Carretta and Paola Schwizer
CO-OPERATIVE BANKING: INNOVATIONS AND DEVELOPMENTS
Santiago Carbó, Edward P.M. Gardener and Philip Molyneux
FINANCIAL EXCLUSION
Allessandro Carretta, Franco Fiordelisi and Gianluca Mattarocci (editors)
NEW DRIVERS OF PERFORMANCE IN A CHANGING FINANCIAL WORLD
Dimitris N. Chorafas
FINANCIAL BOOM AND GLOOM
The Credit and Banking Crisis of 2007–2009 and Beyond
Violaine Cousin
BANKING IN CHINA
Franco Fiordelisi and Philip Molyneux
SHAREHOLDER VALUE IN BANKING
Hans Genberg and Cho-Hoi Hui
THE BANKING CENTRE IN HONG KONG
Competition, Efficiency, Performance and Risk
Carlo Gola and Alessandro Roselli
THE UK BANKING SYSTEM AND ITS REGULATORY AND SUPERVISORY
FRAMEWORK
Elisabetta Gualandri and Valeria Venturelli (editors)
BRIDGING THE EQUITY GAP FOR INNOVATIVE SMEs
Munawar Iqbal and Philip Molyneux
THIRTY YEARS OF ISLAMIC BANKING
History, Performance and Prospects
Sven Janssen
BRITISH AND GERMAN BANKING STRATEGIES
Kimio Kase and Tanguy Jacopin
CEOs AS LEADERS AND STRATEGY DESIGNERS
Explaining the Success of Spanish Banks
M. Mansoor Khan and M. Ishaq Bhatti
DEVELOPMENTS IN ISLAMIC BANKING
The Case of Pakistan
Mario La Torre and Gianfranco A. Vento
MICROFINANCE
Philip Molyneux and Munawar Iqbal
BANKING AND FINANCIAL SYSTEMS IN THE ARAB WORLD
Philip Molyneux and Eleuterio Vallelado (editors)
FRONTIERS OF BANKS IN A GLOBAL WORLD
Anastasia Nesvetailova
FRAGILE FINANCE
Debt, Speculation and Crisis in the Age of Global Credit
Dominique Rambure and Alec Nacamuli
PAYMENT SYSTEMS
From the Salt Mines to the Board Room
Catherine Schenk (editor)
HONG KONG SAR’s MONETARY AND EXCHANGE RATE CHALLENGES
Historical Perspectives
Andrea Schertler
THE VENTURE CAPITAL INDUSTRY IN EUROPE
Alfred Slager
THE INTERNATIONALIZATION OF BANKS
Noël K. Tshiani
BUILDING CREDIBLE CENTRAL BANKS
Policy Lessons for Emerging Economies
Palgrave Macmillan Studies in Banking and Financial Institutions
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British and German
Banking Strategies
Sven Janssen
© Sven Janssen 2009
Softcover reprint of the hardcover 1st edition 2009 978-0-230-22048-5
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ISBN 978-1-349-30600-8 ISBN 978-0-230-23393-5 (eBook)
DOI 10.1057/9780230233935
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10 9 8 7 6 5 4 3 2 1
18 17 16 15 14 13 12 11 10 09
Contents
List of Tables and Figures ix
Abbreviations xi
Acknowledgements xiii
Preface xiv
1 Setting the Scene 1
2 What Is a Bank? 8
2.1 Introduction 8
2.2 The rationale for banking regulation 8
2.3 Legal definition of a bank in the European Union 10
2.4 Legal definition of a bank in the United Kingdom 10
2.5 Legal definition of a bank in Germany 12
2.6 Microeconomic definition of a bank 15
2.7 Macroeconomic definition of a bank 17
3 Corporate Strategy Analysis and Applicability to
the Banking Sector 19
3.1 Introduction 19
3.2 Strategy analysis in its historical context 21
3.3 A multifaceted term: “strategy” as it is used in this book 27
3.3.1 Strategy as plan 27
3.3.2 Strategy as pattern and structure 29
3.3.3 Strategy as perspective 30
3.3.4 Strategic positioning 31
3.3.5 Strategy as ploy and tactic 33
3.3.6 B etween micro and macrostructure:
“strategy” in this book 34
3.4 E conomic structures revisited – competitive forces in
the banking industry 35
3.4.1 A framework for competition analysis 36
3.4.2 Barriers to entry in banking 38
3.4.3 A nalysis of competition among established
players in a banking market 42
3.4.4 The substitution problem for banking
products and services 44
3.4.5 The bargaining power behind a bank’s
asset-liability management 47
v
vi Contents
3.5 A bank’s resources determine its core competence 55
3.6 Banking: the link between micro- and macrostructures 60
4 British and German Banking: Case Studies 65
4.1 Introduction 65
4.2 The Royal Bank of Scotland plc 78
4.2.1 Introduction and status quo in 1993 78
4.2.2 Income structure 80
4.2.2.1 Structural overview 80
4.2.2.2 Corporate and investment banking 82
4.2.2.3 Asset management 83
4.2.2.4 Retail banking 84
4.2.3 Cost and risk management 88
4.2.4 Asset-liability structure 91
4.2.5 Profitability 93
4.2.6 Conclusion 94
4.3 Deutsche Bank AG 95
4.3.1 Introduction and status quo in 1993 95
4.3.2 Income structure 96
4.3.2.1 Structural overview 96
4.3.2.2 Corporate and investment banking 98
4.3.2.3 Asset management 100
4.3.2.4 Retail banking 102
4.3.3 Cost and risk management 105
4.3.4 Asset-liability structure 107
4.3.5 Profitability 109
4.3.6 Conclusion 110
4.4 HSBC Holdings plc 112
4.4.1 Introduction and status quo in 1993 112
4.4.2 Income structure 114
4.4.2.1 Structural overview 114
4.4.2.2 Corporate and investment banking 117
4.4.2.3 Asset management 119
4.4.2.4 Retail banking 120
4.4.3 Cost and risk management 122
4.4.4 Asset-liability structure 124
4.4.5 Profitability 126
4.4.6 Conclusion 127
4.5. Commerzbank AG 128
4.5.1 Introduction and status quo in 1993 128
4.5.2 Income structure 130
4.5.2.1 Structural overview 130
4.5.2.2 Corporate and investment banking 133
4.5.2.3 Asset management 134
4.5.2.4 Retail banking 137
Contents vii
4.5.3 Cost and risk management 139
4.5.4 Asset-liability structure 141
4.5.5 Profitability 143
4.5.6 Conclusion 144
4.6 Barclays plc 145
4.6.1 Introduction and status quo in 1993 145
4.6.2 Income structure 147
4.6.2.1 Structural overview 147
4.6.2.2 Corporate and investment banking 148
4.6.2.3 Asset management 151
4.6.2.4 Retail banking 152
4.6.3 Cost and risk management 155
4.6.4 Asset-liability structure 157
4.6.5 Profitability 159
4.6.6 Conclusion 160
4.7 HVB Group AG/Bayerische Vereinsbank AG 161
4.7.1 Introduction and status quo in 1993 161
4.7.2 Income structure 163
4.7.2.1 Structural overview 163
4.7.2.2 Corporate and investment banking 166
4.7.2.3 Asset management 168
4.7.2.4 Retail banking 169
4.7.3 Cost and risk management 172
4.7.4 Asset-liability structure 176
4.7.5 Profitability 179
4.7.6 Conclusion 180
4.8 Lloyds TSB plc 181
4.8.1 Introduction and status quo in 1993 181
4.8.2 Income structure 183
4.8.2.1 Structural overview 183
4.8.2.2 Corporate and investment banking 184
4.8.2.3 Asset management 186
4.8.2.4 Retail banking 186
4.8.3 Cost and risk management 190
4.8.4 Asset-liability structure 192
4.8.5 Profitability 194
4.8.6 Conclusion 195
4.9 Dresdner Bank AG 196
4.9.1 Introduction and status quo in 1993 196
4.9.2 Income structure 198
4.9.2.1 Structural overview 198
4.9.2.2 Corporate and investment banking 201
4.9.2.3 Asset Management 204
4.9.2.4 Retail banking 206
viii Contents
4.9.3 Cost and risk management 208
4.9.4 Asset-liability structure 212
4.9.5 Profitability 214
4.9.6 Conclusion 215
5 Conclusions 218
5.1 Introduction 218
5.2 Discussion of the findings from each case study 219
5.3 Cross-case pattern analysis 225
5.4 Bridging the micro/macro divide in
European economic integration 233
5.5 Epilogue – daring an outlook 241
Bibliography & Sources 245
Index 287
List of Tables and Figures
Tables
4.1 Aggregate data on the British and German banking sector 74
4.2 C omparison of average funding structures at Hypo-Bank and
Vereinsbank between 1993 and 1997 178
4.3 C omparison of average asset structures at Hypo-Bank and
Vereinsbank between 1993 and 1997 178
Figures
1.1 Longitudinal and cross-country comparison 4
3.1 Banking structure 44
4.1 Real GDP-growth (1985–2005): United Kingdom and Germany 66
4.2 Inflation rates (1985–2005): United Kingdom and Germany 66
4.3 Unemployment rates (1985–2005): United Kingdom and Germany 67
4.4 RBS: income structure 80
4.5 RBS: cost to income ratio and loan loss provisions 88
4.6 RBS: asset structure 91
4.7 RBS: liabilities and equity structure 92
4.8 Deutsche Bank: income structure 97
4.9 Deutsche Bank: cost to income ratio and loan loss provisions 106
4.10 Deutsche Bank: liabilities and equity structure 108
4.11 Deutsche Bank: asset structure 108
4.12 HSBC Holdings: income structure 115
4.13 HSBC Holdings: cost to income ratio and loan loss provisions 122
4.14 HSBC Holdings: liabilities and equity structure 124
4.15 HSBC Holdings: asset structure 125
4.16 Commerzbank: income structure 131
4.17 Commerzbank: cost to income ratio and loan loss provisions 139
4.18 Commerzbank: asset structure 141
4.19 Commerzbank: liabilities and equity structure 142
4.20 Barclays: income structure 148
4.21 Barclays: cost to income ratio and loan loss provisions 155
4.22 Barclays: liabilities and equity structure 157
4.23 Barclays: asset structure 158
4.24 HVB Group: income structure 164
4.25 HVB Group: cost to income ratio and loan loss provisions 173
4.26 HVB Group: asset structure 176
ix