US Banks Take Global Lead With Profitability in Focus

By Pilar Martinez,
Money and Investing Writer

U.S. Wall Street firms are threatening European banks.

Wall Street has the platform that a globally invested bank needs to succeed.

The Wall Street Journal thoroughly analyzed the worry that German investment banks now have due to the American advantage.

According to the Wall Street Journal, “Over the past five years, the shares of J.P. Morgan Chase & Co. (NYSE: JPM) increased by 0.82 percent, Bank of America Corp. (NYSE: BAC) decreased by 0.03 percent, Citigroup Inc., (NYSE: C) increased by 0.93 percent, Goldman Sachs Group Inc. (NYSE: GS) increased by 0.65 percent and Morgan Stanley (NYSE: MS) increased by 0.32 percent, on average climbing 45 percent. In the same period, European banks Barclays, Credit Suisse Group (NYSE: CS) 0.22 percent, Deutsche Bank (NYSE: DB), UBS Group (NYSE: UBS-D) and Royal Bank of Scotland (LON: RBS) PLC are down 17 percent.”  US investment banks are rising in success (WSJ).

This is inevitably discouraging European banks, causing them to undertake less risky investments, and shrinking their balance sheets.

U.S banks have capitalized exponentially more so than European banks have.

European banks established real estate in Connecticut and now that the US has such a leg up in the global market, European banks had to switch up their plans and retreat from the establishment they had in Connecticut.

While some European Banks have decided to change some of their techniques in order to keep up with the newly created policies, other banks such as RBS have decided the better approach would be to eliminate certain parts of the organization (WSJ).

Among the changes of regulations and policies and the advancements US banks have, European Banks are also lagging behind due to rules recently imposed by the European Union and the top manager bonus restrictions.

These rules have influenced the performance and judgement of employees and management in the European Banks.

The US economy is at its prime right now based on comparison to its global affiliations.

Europe is working on getting back in a stable position and still is carefully analyzing its balance sheets.

Asian banks are also looking to maintain its presence on Wall Street, even though it is greatly over powered by the successful and ever growing US banks and firms.

Reuters states “The shrinking European banks are putting more focus on profitability than in the past, which investors and analysts said was welcome, but there is unease about whether other businesses will be hurt by the smaller scale” (Reuters).

Since the US banks are globally in the lead, this leaves the bigger question of how European banks will go forth with their decisions.

This striking news of the U.S. in the lead generally questions for shareholders where to apply their resources and energy in comparison to the successful investments banks from different parts of the world (Reuters).

Since the U.S. economy is in better shape now than other parts of the world, who knows what European banks will come up with once they recover their economy and revamp the new approach and strategic plans to the banks.

Only time will tell, but for now, US takes the global lead.

A version of this article appeared in the Tuesday, October 6th print edition.

Contact Pilar at
pilar.martinez@student.shu.edu

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