Markets and Channels
2.2 Mission of the Corporate Banking Area
2.2.3 Comparative Analysis by Country and by Bank Size
The different elements contributing to the identification of the mission of the corporate area tend to highlight a certain correlation with the size of the bank and above all with the geographical scale of that bank's operation (Cairns et al. 2002).
The comparisons between Italian and non-Italian banks reveal many dif- ferentiation factors (Cairns et al. 2002). On one side, the uniqueness of the divisionalization model of the sole Italian bank that has adopted it; on the other, non-Italian banks with the following:
- strong and declared orientation toward the concept of customer satisfac- tion as a key element in the mission of the corporate area (mentioned by
16 banks surveyed through public documentation and 4 panel banks);
- strong and declared orientation toward the support of enterprises' inter- nationalization processes (mentioned by 18 banks surveyed through public documentation and 5 panel banks);
- strategic orientation toward the development of activities on interna- tional level (indicated by 18 banks surveyed through public documenta- tion and 5 panel banks);
- minimum criterion for access to the corporate area significantly higher than in Italian banks. The former tend to define the corporate area as a wholesale segment (in 9 banks surveyed through public documentation reference is made to over $500m sales and in seven banks surveyed through public documentation reference is made to over $10m deals);
- general orientation (in 18 banks surveyed through public documenta- tion) specifically characterized by a comprehensive offer extended to the entire system of corporate finance, corporate lending and asset man- agement products;
- concentration of Corporate & Investment Banking (thus excluding commercial lending) into product companies of clear reputation and visibility frequently purchased on the market;
- focus on strategic business areas, that is in terms of such combinations as "served clients/provided services/managed geographical areas"; there is the symbolic case of one of the "other European panel banks" that has re-configured its own division model as a matrix;
- presence of a strategy of a more extended corporate area at the interna- tional level than in the domestic area of origin (in this sense banks X and W are very significant).
The following differentiation elements can be observed within these banks:
- orientation toward (or "consideration o f ) SME target exclusively by continental Europe banks (France, Germany, Spain); vice versa Anglo- Saxon banks (USA and UK) delegate SME services to the sector of commercial banks (Smith and Walter 1997);
- orientation toward corporate lending in continental Europe banks, mostly in the original domestic market and in relation to target SMEs;
- corporate area basically oriented to capital markets and corporate fi- nance in Anglo-Saxon banks;
- corporate area basically oriented to capital markets and asset manage- ment in Swiss banks.
In conclusion, the overall analysis of banks reveals radically different positioning models in the market of corporate banking according to the choice of the business areas to be managed, that is of the combinations
"served clients/provided services/managed geographical areas". In this sense it is possible to distinguish 5 relevant strategic groups4:
1. Global Corporate and Investment Banks;
2. Universal European and Japanese Banks with global players' ambitions;
3. Universal banks with Pan-European selective strategy;
4. Universal banks with strong national presence;
5. Universal banks with strong regional presence.
Global Corporate and Investment banks are characterized by the fact that they are able to operate in a dominant position in all market dimen- sions: products provided, clients and sectors served, related geographical areas. This group includes a restricted number of American banks, which are defined as "bulge bracket firms" (Merril Lynch, Morgan Stanley DW, Goldman Sachs). Their global dimension is coordinated with the local one (global strategy) through regional/country bankers.
European and Japanese banks with global players' ambitions are charac- terized by the fact that they have a consolidated domestic matrix through which they have developed the possibility to operate in a dominant posi- tion throughout all market dimensions: provided products, served clients and sectors, related geographical areas. This group includes a number of
4 Forestieri (2003).
European banks (see Hackethal 2004 for the German ones) and Japanese banks that have made important acquisitions of big global players in order to speed up their growth on the global scale. Examples are Deutsche Bank, UBS, Credit Suisse, Nomura and Mitsubishi (Table 2.3).
Table 2.3. Development of complex groups and financial conglomerates for the extra lending area: empirical evidence emerging on the international level
Citigroup Citibank Solomon Brothers Smith Barney Schroeders
Credit Suisse Group Credit Suisse First Boston Donaldson &
Co
Deutsche Bank Group Deutsche Bank
Morgan Gren- fell
Alex Brown Bankers Trust
JP Morgan Group Manufactures Hanover Chemical Chase Man- hattan Hambrecht &
Quist Robert Flem- ing
Beacon Group JP Morgan
UBS Group Swiss Bank UBS Philips &
Drew S. G. War- burg 0' Connor Dillon Read Paine Web- ber
Universal banks with Pan-European selective strategy include differ- ently-sized banks from continental Europe that develop the area of Corpo- rate and Investment banking with high ambitions but not comparable with those of global players. A large number of these banks associate their strong and consolidated domestic position with a selective strategy for to the type of product or the target geographical area. Examples include ABN Amro, Santander, BNP Paribas, Unicredito, Credit Agricole.
Universal banks with strong national presence include large-size banks that operate in domestic markets with consolidated leadership positions.
However, the scope of action does not develop along the direction of the geographical areas and that is why their international presence is relatively limited rather than episodic. Their concentrated geographical presence in- evitably conditions their product choices because: a) it makes them re- sponsive to the specific features of the industrial system; b) it reduces po- tential business volumes related to corporate finance services. Examples include Banca Intesa, Commerzbank, Capitalia, San Paolo IMI, Montepa- schi Siena, Banca Nazionale del Lavoro.
Universal banks with strong regional presence include medium to large- size banks that operate in domestic markets with consolidated leadership positions above all on the regional level. The scope of action does not de- velop along the direction of the geographical areas and that is why their in-
ternational presence is non-existent and their national presence is not com- plete. Services provided are essentially concentrated on lending and the di- versification of the offer is developed through commercial or equity agreements with specialized merchant banks. Examples include Credem and Antonveneta.