Bankers see surge of bank mergers

LONDON (Reuters) - Next year could bring a sharp acceleration in the scale and pace of crossborder consolidation in the European banking industry, top investment bankers said on Tuesday.

"This is going to be the most dominant theme for next year," Viswas Raghavan, head of Debt and Equity Capital Markets at JP Morgan Securities, told the Reuters Investment Banking Summit in London. "We will see (deals involving) national champions and global champions, and we will see transformational deals.

"Next year is when dinner will be served."

Banks with high stock valuations have a unique opportunity to use their stock to help fund deals.

"If you have to do something in the banking sphere using your stock do it now or forever hold your word," said Raghavan.

A string of crossborder deals over the past two years have included Banco Santander's (SAN.MC: Quote, Profile, Research, Stock Buzz) acquisition of British mortgage lender Abbey in 2004, UniCredit's (CRDI.MI: Quote, Profile, Research, Stock Buzz) purchase of Germany 's HVB in 2005 and BNP Paribas's (BNPP.PA: Quote, Profile, Research, Stock Buzz) acquisition of Italy's BNL earlier this year.

While significant, none of these transactions has qualified as transformational, or a deal which would completely alter the acquiring bank's prospects, in the view of financial analysts.

Raghavan declined to identify any bank in Europe that might be a potential target for takeover but said he believed most activity would probably focus on commercial banks.

"I see commercial banks buying commercial banks and investment banks as the final icing on the cake."

Paulo Pereira, a partner at newly established merger and acquisition adviser Perella Weinberg Partners, said the technical difficulty of putting together large crossborder deals between banks could slow the pace of consolidation.

"The key issue is the difficulty of putting these transactions together," said Pereira.

"The business of models are different, and it's difficult to find a perfect fit. When you add to that the complexity of crossborder mergers of equals, I do not think caution is unwise," he said.

But he said he was in no doubt that increasingly large combinations of banks could be on the cards.

"My expectation is that this is a trend that will increase with potential for very large mergers of equals," he said.

Financial markets have been rife with rumors in recent months that even some of Europe's largest banks, among them ABN AMRO AAH.AS of the Netherlands and Spain's BBVA BBV.MC, could be in the sights of larger institutions.

Both banks have denied that they are engaged in merger talks.