United States Bank Mergers & Acquisitions (BB&T)

 

A BB&T office in Greensboro, North Carolina. 

Photo credit: Warren LeMay. You can see more of his photos via this link: https://www.flickr.com/photos/warrenlemay

BB&T (Branch Banking & Trust)

BB&T traces its origins to eastern North Carolina in the aftermath of the American Civil War (1861 to 1865) during which the area was struggling to recover and rebuild from the devastation of four years of bloody fighting between the Union and Confederacy forces. Countless lives were lost, and the livelihoods of those who survived were often ruined. Many families were physically and emotionally torn across both geographical and ideological battle lines. The economy, along with many farms and towns, and businesses and homes suffered catastrophic damages. The end of the Civil War unfortunately did not mean the end of the divisiveness, distrust and political and personal resentments.

Against, or perhaps one should say despite this hardship, Alpheus Branch, the son of a wealthy planter in Halifax County, moved to Wilson County and eventually married Nannie Barnes, the daughter of prominent figure General Joshua Barnes and one of Wilson’s early founders. Alpheus Branch launched a mercantile business called Branch & Co. and he became acquainted with Thomas Jefferson Hadley, another important local leader. In 1872, Alpheus Branch and Thomas Jefferson Hadley joined forces and launched a private bank named Branch & Hadley. The new concern accepted deposits and made loans to local planters and businesses. The U.S. Southeast by the 1880s had returned to rising prosperity, as the traditional crop of cotton was supplemented by the new cash crop of tobacco. In 1887, Mr. Branch bought out his partner’s interests and Branch & Hadley became Branch & Co., Bankers.

Then in 1889, Alpheus Branch, his father-in-law Gen. Joshua Barnes, Branch’s old business partner Thomas Jefferson Hadley, along with J.F. Bruton, R. L. Thompson and Walter Brodie were granted a state charter from the North Carolina legislature to establish the Wilson Banking & Trust Co. The original intention of the new business was to offer banking, trustee and custodian services but a legislation change prevented the banking concern from actually carrying out its trust business until 1907.

Meanwhile, Alpheus Branch had died in 1893 and in 1900, his private bank Branch & Co., Bankers was incorporated into the Branch Banking Co., holder of the state charter and successor to the Wilson Banking & Trust Co. following two name changes. In 1913 – some six years after the launch of the trust services, Branch Banking Co. changed its name to Branch Banking & Trust Co., or BB&T for short.

In comparison with Europe, mainland United States escaped World War I physically unscathed and enjoyed a booming economy in the 1910s and 1920s. During this time, Branch Banking & Trust earned the reputation as one of the larger and stronger banks in North Carolina. The bank also expanded into the insurance and mortgage loan markets in 1922 and 1923 respectively.

When America’s over exuberance collapsed in 1929, the ensuing stock market crash and Great Depression caught many ordinary people and businesses big and small off-guard. Between January 1930 and January 1932 alone, well over 100 banks in North Carolina went bankrupt when their borrowers defaulted on their loans. As panics set in, bank runs saw the public transferring their deposits from Wilson’s seven other banks to the government-run United States Postal Savings System. What many didn’t know was that the postal savings system was not a bank on its own per se, but simply re-deposited the funds to designated banks. In Wilson County’s case, the postal savings’ banker was none other than Branch Banking & Trust. Thus, while Wilson’s other banks collapsed, BB&T enjoyed the confidence of government officials and remained financially healthy. As a matter of fact, as hundreds of banks failed in North Carolina between 1929 and 1933, BB&T’s network grew from five to eleven branches, and total assets increased almost threefold. 

The 1930s slump then came to an abrupt end when World War II broke out in 1939, as wartime demand for military machinery and foods trumped other concerns. Notwithstanding its massive tolls to lives, properties and the environment elsewhere, the global conflict lifted the American economy, employment and prosperity. A combination of patriotism and war-time restrictions on the production of non-war-related civilian consumer goods also caused personal savings to rise steadily, as things were just generally not available for sale. When peace returned in 1945, the returning soldiers and a massive influx of immigrants from war-torn Europe and other parts of the world to the U.S. led to a sharp increase in the demand for consumer goods, automobiles, machinery, infrastructure construction, housing, food staples, and consumer and business services – in other words – everything.

BB&T rode on this unprecedented post-WWII growth and the height of the so-called “American century” so that by the end of the 1960s, it ran a network of 60 branches in 35 cities in North Carolina. Legislative changes in the 1980s and 1990s slowly loosened up inter-state banking restrictions in the U.S., and by 1994, BB&T’s network numbered over 260 branches across both North and South Carolina. By this time, BB&T was the fourth largest bank in its home state.

In late 1994, BB&T Financial Corp. and Winston-Salem-based Southern National Corp. (fifth largest bank in North Carolina) agreed to merge in a deal that was valued at USD $2.2-billion. The combined bank became the largest bank in terms of deposits in North Carolina and the No. 3 in South Carolina with over 430 branches, including a small operation in Virginia. This merger also led to the new bank transferring its headquarters from Wilson to Winston-Salem, the home base of Southern National Corp. In 1996, Southern National took over United Carolina Bancshares Corp. for USD $985-million. United Carolina had a network of 153 branches across North and South Carolinas. The following year, Southern National resurrected and renamed itself BB&T Corp.

During the rest of the 1990s and the early 2000s, BB&T continued to expand outside of its stronghold in the Carolinas, buying up numerous regional and community banks one by one but yet building up an ever-increasing presence in Virginia, West Virginia, Maryland, Washington DC, Georgia and Tennessee. Some of the more significant takeovers (those valued at at least USD $200-million, or those that represented entry to a new market) are listed below.

Recent transactions:

• Between December 1997 and February 1998, BB&T bought Franklin Bancorporation of Washington, D.C. (for USD $165-million) and Maryland Federal Bancorp (USD $265-million). This marked BB&T’s first forays into the wealthy capital city area.
• In August 1998, BB&T acquired two financial institutions in Virginia: MainStreet Financial Corp. of Martinsville for USD $554-million and stockbroker Scott & Stringfellow Financial Inc. of Richmond for USD $131-million. MainStreet operated 46 branches in Virginia and three in Maryland.
• In January 1999, BB&T bought Mason-Dixon Bancshares Inc. of Westminster in Maryland for USD $257-million. The bank had 38 offices in the state.
• Also in January 1999, BB&T took over First Citizens Corp. of Newnan for USD $126-million. While the transaction was small, it became BB&T’s first entry into the state of Georgia with a network of 14 offices in south metropolitan Atlanta.
• In April 1999, BB&T purchased First Liberty Financial Corp. of Macon for USD $500-million. The purchase gave BB&T a network of 52 branches in the Macon and Savannah areas of Georgia.
• In what was its third acquisitions in Georgia in 1999, BB&T took over Premier Bancshares Inc. for USD $624-million in July. Premier had 42 branches in Atlanta and Northern Georgia.
• In July 2000, BB&T acquired FCNB Corp. of Frederick for USD $226-million. FCNB ran 34 offices in the central Maryland-Washington, D.C. corridor.
• Also in July 2000, BB&T purchased One Valley Bancorp Inc. of Charleston for USD $1.13-billion. The acquisition gave BB&T a network of 77 branches in West Virginia and another 48 in Virginia.
• In August 2000, BB&T took over BankFirst Corp. of Knoxville for USD $150-million. The small purchase was BB&T’s first entry into the state of Tennessee.
• In June 2001, BB&T bought Century South Banks Inc. of Alpharetta for USD $467-million. In doing so BB&T gained 40 offices in Georgia, North Carolina, Tennessee and Alabama.
• In August 2001, BB&T took over F&M National Corp. of Winchester. The holding company operated 174 branches and offices providing banking, mortgage, insurance and trust services in the Historic Triangle area of Virginia, Richmond and the metropolitan Washington, D.C. area.
• In November 2001, BB&T acquired MidAmerica Bancorp of Louisville in Kentucky for USD $415-million. MidAmerica operated 30 branches mainly through its Bank of Louisville subsidiary.
• Also in November 2001, BB&T took over AREA Bancshares Corp. for USD $451-million. AREA had 72 branches in Kentucky.
• In May 2002, BB&T bought Regional Financial Corp. (First South Bank) of Tallahassee for USD $275-million. First South Bank operated 22 offices in Tallahassee and the Florida Panhandle, Jacksonville, and along the Gulf Coast from Beverly Hills to Naples.
• In January 2003, BB&T made a big expansion in Virginia when it acquired First Virginia Banks Inc. for USD $3.38-billion. First Virginia’s subsidiaries operated 364 branches in total: 298 in Virginia, 55 in Maryland and 11 in northeast Tennessee.
• In April 2004, BB&T took over Republic Bancshares Inc. St. Petersburg for USD $392-million, gaining a network of 71 branches in Southeast Florida.
• In December 2005, BB&T acquired Main Street Banks Inc. of Atlanta for USD $623-million. Main Street Banks had 29 banking and insurance offices in Atlanta and Athens, Georgia.
• In December 2006, BB&T took over Coastal Financial Corporation of Myrtle Beach for USD $395-million. It had 17 branches in greater Myrtle Beach and seven in greater Wilmington, South Carolina.
• In June 2009, BB&T repaid the U.S. government the USD $3.1-billion that it received under the Troubled Asset Relief Program (TARP) after regulators determined the bank was well capitalized.
• In August 2009 during the global credit crisis that started in 2008, Colonial Bank of Montgomery failed and was shut down by the Alabama State Banking Department and the Federal Deposit Insurance Corporation (FDIC). In a brokered agreement with the FDIC, BB&T took control of all Colonial Bank’s 346 branches and USD $20-billion of client deposits in Alabama, Florida, Georgia, Nevada and Texas. The FDIC and BB&T agreed to share losses on about $15 billion of those assets.
• In February 2019, Winston-Salem-based (North Carolina) BB&T agreed to acquire SunTrust Banks, Inc. for USD $28.24-billion in stock. Announced as a “merger of equals”, the former BB&T shareholders would control 57% of the new bank, with SunTrust holders owning the rest. The new bank would be known as Truist Financial (pronounced “True-ist”), the unusual choice of which was mocked by many after the announcement. Truist would become the No. 6 bank in the U.S. and move its headquarters to Charlotte, but Winston-Salem would become the bank's headquarters for community banking. At the time of the merger announcement, SunTrust had about 1,300 branches and BB&T about 1,800 branches. A major consolidation of the branch network was expected.

Click here to return to the Index page.

Italy Bank Mergers & Acquisitions (Banca Monte dei Paschi di Siena)

Photo: a Banca Monte dei Paschi di Siena branch in the city of Cosenza, Italy.

I wish to express my special thanks to my friend Rob van Kan for taking this photo and allowing me to use it. You may see more of Rob's photos via this flickr link:

https://www.flickr.com/photos/8980780@N07/

Rob also maintains a blog on world affairs (in Dutch):
https://edgeofeurope.wordpress.com/


Banca Monte dei Paschi di Siena

Today, we generally think of banking for the following reasons: making a deposit of “money” into an account for safekeeping; obtaining a loan in its many forms; and relying on various banking products (such as a cheque, credit card, bank card, money order, electronic fund transfer, or even Apple Pay or PayPal) to make payments to facilitate transactions. While many of these banking functions only became common and universal from the late 19^th century (some if not only the 2010s!), the origins of modern banks date back to Italy in the 15^th century, which after the Dark Ages and the “Black Death” plague of the late 1340s, saw a re-birth of cultural, literary, science, economic and social advancement, hence the term “Renaissance era”.

Commerce between city states and dukedoms in Europe was on a major upswing during this time, and the need for money exchange and payments for trade transactions led to some innovative merchants setting up temporary money-dealing benches at trade fairs to offer an early form of trade finance. It was the word “banco”, Italian for “bench,” that evolved into words such as bank (English, Dutch, German and Danish etc.), banque (French) and pankki (Finnish). However, such early banks did not have permanent offices, and really only catered to travelling merchants at trade fairs. Meanwhile, the elites of society: the Pope, the archbishops, the princes, the dukes, the aristocrats and high government officials had close ties with the goldsmiths, who acted as private bankers at the time.

At the other end of society, which was the vast majority of the people, be they blacksmiths, farmers, labourers, artisans, servants or housewives, possessed far too little spare cash to attract the attention of the private bankers. Thus, most of the masses had no access to any bank and no ability to obtain a loan. This, however, began to change in the mid-1400s, when the Catholic Church and some political leaders took pity of the underclass’s grim livelihood by establishing charitable pawnshops or charitable loan agencies known as “monti di pietá” (or monte di pietá when singular, literally meaning "mount of compassion").  These monti di pietá offered low-interest-rate loans for collateral such as clothing, family heirlooms or tools.

While many of Renaissance Italy’s monti di pietá were founded by the Catholic Church, some were established by political leaders, which was the case for the Republic of Siena’s Monte Pio when the city state’s Magistrate Council along with local aristocrats provided 5,000 florins in 1472 to back the charitable loan agency.

The Renaissance period, despite its romantic sentiments in modern beliefs, was nevertheless a turbulent era.  Between 1551 and 1559, Henry II of France fought a war against Holy Roman Emperor Charles V (ruler of the Spanish Empire) and his ally Duke Cosimo I de’ Medici of Florence, for domination of Europe and the Mediterranean Sea. For decades, the Republic of Florence and Republic of Siena had been bitter political and economic rivals. In 1555, Siena fell and was annexed by Florence, but Monte Pio was allowed to continue operation. In 1580, it gained even more prominence when it assumed the role as the collection agency for the Ufficio dell’Abbondanza (“Office of the Food Surplus”) in Siena.

By the 1620s, demand for farming-related loans in Siena expanded at such pace that Monte Pio needed more capital. In 1624, Ferdinando II de’ Medici agreed to establish an agricultural loan agency based on the model of Monte Pio. However, the shrewd Grand Duke of Tuscany did not want to be personally liable to potential losses (and even bankruptcy, should it ever happen) of new agricultural loan agency.  To indemnify himself (remove his liability risk), Ferdinando II took the unusual and genius step of entailing the revenue from the state-owned pasture land to the loan agency. In essence, this reform gave the new loan agency a steady source of income, and its depositors a de facto state guarantee backed by the revenue of the pasture land. Yet it also transferred the risk of the business to the collective agricultural economy of Tuscany.  To emphasize this pasture revenue feature and modus operandi, the new loan agency was aptly named Monte dei Paschi di Siena (MPS), with the Italian word “paschi” meaning “pasture”.

Monte Pio and Monte dei Paschi both continued operations during the 18^th century, amidst the political instability following the end of the House of Medici in 1737.  In 1784, the two Monti were amalgamated into a single entity but continued to maintain the dual mandates of charity and banking. One prime example was the financial contribution it made to help re-build Siena after a disastrous earthquake in 1798.

In 1833, Monte dei Paschi underwent a major re-organization, including the establishment of a separate savings bank (known as a “cassa di risparmio”). In 1872, a new charter once again confirmed Monte dei Paschi to be an institution belonging to the city of Siena.  The 1872 charter also stipulated that up to half of the bank’s profits be distributed to fund charitable or public utility works. Meanwhile, the Grand Duchy of Tuscany itself had ended back in 1859, and by 1861, it had become part of the newly-created Kingdom of Italy.

Despite its centuries-long existence, Monte dei Paschi di Siena’s operations only expanded beyond the provinces of Siena and Grosseto in the early 1900s. It nevertheless ranked second amongst all savings banks in the country by 1910.  In 1929, MPS brokered the merger of Credito Toscano and the Banca di Firenze (Bank of Florence) and acquired a stake in the resulting entity Banca Toscana. The global Depression in the 1930s hit Italy hard, but MPS struggled along relatively better than many rivals.

Italy after the end of World War II was known for its slow economic growth, strict bureaucratic regulation, high unemployment and inflation, and weak currency (the Italian lira). Nevertheless, MPS expanded further into different regions of Italy and opened representative offices in major financial centres of the world: New York, London, Singapore and Frankfurt.

In 1990, MPS acquired controlling stakes in a medium-term merchant bank called the Mediocredito Toscano as well as an agricultural lender called dell’INCA (Istituto Nazionale per il Credito Agrario).  In 1992, MPS acquired control of another Tuscany savings bank: Cariprato -- Cassa di Risparmio di Prato. It also launched an insurance joint-venture named Monte Paschi Vita with French mutual bancassurance giant Crédit Agricole. Also in 1992, MPS bought private bank Banque Atlantis in Geneva. Then in 1994, mutual funds were offered for the first time by the newly-created Ducato Gestioni unit.

Meanwhile, back in the late 1980s, the European Union began to constitute a “single-market” framework, which sought to guarantee free movement of goods, services, capital and people between all member states, to be effective in 1993. This opening of goods and services market would throw the Italian banking market wide open to competition from other EU banks. To prepare the backward and fragmented domestic banking market for the new competition, Italy proposed a remedy that centred on four goals: de-nationalization (relinquishment of state management), consolidation, modernization and strengthening. The first major reform involved the Italian government passing the Amato legislation in 1988, which required the state-administered savings banks to be converted into private-sector, for-profit joint-stock banks. In 1995, the Monte dei Paschi was formally separated into the Banca Monte dei Paschi di Siena (BMPS) SpA (SpA is the Italian term for “limited-liability company”) and the charitable organization Fondazione Monte dei Paschi di Siena. Initially, this separation was only a legal technicality, as the charitable foundation still fully owned and controlled the bank.  A second stage of the banking reform was the passage of the Ciampi legislation in 1998, which stipulated that the charitable foundations must gradually spin off their holdings of the savings banks, thus ending the centuries-old tradition of state-control and non-profit nature of the Italian savings banks.

In 1999, Banca Monte dei Paschi di Siena was partially floated on the Milan stock exchange. The stock listing not only gave BMPS access to capital from the international financial market, but much greater freedom to acquire or be acquired by other banks.

Recent transactions:

• In 1998, MPS bought 70% of Banca Agricola Montavana, which had 290 branches in northern Italy.
• In 2000, MPS bought a 94% stake in Banca del Salento and renamed it Banca 121. It took full ownership in 2005.

• In 2001, MPS acquired a 4.75% stake in Banca Nazionale del Lavoro (BNL) and the two banks entered into merger talks but failed to settle on the terms.

• In 2002, MPS took full control of Florence-based Banca Toscana, a bank with over 400 branches and one which MPS had had a stake in since 1929.

• The wave of imprudent acquisitions in the 1990s, however, proved costly to MPS as bad loans soared. In 2003, MPS sold its 79% stake in Cariprato (acquired in 1992) to Banca Antoniana Popolare Veneta for EUR 411-million.

• In 2007, MPS acquired 55% of Biverbanca, the new name for Cassa di Risparmio di Biella e Vercelli from rival Intesa Sanpaolo for EUR 399-million (USD $570-million). Biverbanca had 105 branches in north-western Italy.

• Also in 2007, MPS acquired AXA SIM SpA for EUR 50-million (USD $69-million), an asset manager with EUR 1.9-billion in assets under management.

• In early 2008, MPS made its boldest, yet most disastrous purchase when it spent EUR 9.0-billion (USD $13.2-billion) to buy Banca Antonveneta from Spain’s Banco Santander. Santander had only just taken control of Banca Antonveneta a few months earlier when it and Royal Bank of Scotland and Belgium’s Fortis jointly acquired Dutch banking giant ABN AMRO Holding NV for EUR 70-billion (USD $101-billion). ABN AMRO had acquired Banca Antonventa back in 2005 and was the first foreign bank to control a major Italian bank. Banca Antonveneta had 1,000 branches. This purchase made MPS one of the largest banking groups not just in Italy but in all of Europe by assets.

• Shortly after that, MPS suffered devastating losses from derivative trading and careless lending made earlier in the decade.

• In 2012, MPS unloaded its 60% stake in Biverbanca for EUR 205-million.

• In 2013, MPS received EUR 4.1-billion of state aid from the Italian government to avoid a collapse.

• In January 2016, MPS’s had non-performing loans totalling EUR 40.0-billion (USD $43.6-billion). Meanwhile, MPS shares tumbled and valued the entire bank at only EUR 2.2-billion.
• In December 2016, MPS failed to raise new capital from private investors.
• In July 2017, MPS together with the Italian government and EU agreed and approved a broad-range re-capitalization and nationalization rescue for the bank. Under the plan, the Italian state would inject EUR 5.4-billion (each EUR = USD $1.1350) into MPS, and junior bondholders of the bank would contribute another EUR 2.7-billion by converting their debentures into equity, which would make up the EUR 8.1-billion of capital required. The Italian state would control 70% of the re-capitalized MPS. Meanwhile, EUR 28.6-billion of bad loans would be removed from the bank's balance sheet into a separate "bad bank." MPS also agreed to close 600 branches, cut 5,500 jobs and cap its top executives' remuneration.
• In late 2020, the Italian government began to search for a buyer for its 68% stake in Monte dei Paschi di Siena. Under the terms of the state bailout negotiated with the EU competition authorities in 2017, Italy must sell the state holding by the end of 2021. In order to make the MPS more attractive, the bank intends to offload EUR 8.1-billion (USD $9.53-billion) of impaired loans to state-owned bad loan manager AMCO before the sale.
• In July 2021, UniCredit announced that it was in talks to acquire the 64% stake of ailing Italian rival Banca Monte dei Paschi di Siena (MPS) from the Italian government, on the condition that the Italian state take up the liability of MPS' bad loans. At the time, it was widely believed that MPS would cease to exist as a stand-alone entity soon. However. talks ended in October 2021, when the Italian Treasury valued the components of MPS selected by UniCredit to be worth between EUR 3.6-billion and 4.8-billion, but UniCredit was only offering EUR 1.3-billion.
• Following a doubling of its share prices in 2024, MPS made a surprise EUR 13.3-billion (USD $14.0-billion) offer in January 2025 to take over Italian investment bank Mediobanca. Between November 2023 and November 2024, the Italian Treasury reduced its stake in MPS from 64% to 11.7% in a series of sales to institutional investors. It was believed that the Italian state purposely selected who was allowed to buy minority stakes in MPS. MPS' offer to acquire Mediobanca was also believed to be a government strategy to create a third major player in the Italian banking sector to challenge UniCredit and Intesa Sanpaolo. To starve off MPS' offer, Mediobanca in April 2025 launched its bid to buy 100% of private bank Banca Generali for EUR 6.3-billion (USD $7.15-billion) from insurer Assicurazioni Generali SpA, which owned 50.2% of Banca Generali. Mediobanca itself owned 13% of Assicurazioni Generali.

Click here to return to the Index page.

China Bank Mergers & Acquisitions (China Construction Bank)

Photo: A China Construction Bank's branch in Hong Kong.

China Construction Bank (中國建設銀行, 中国建设银行)

The modern history of China started out tumultuously when Imperial China was overthrown in 1911 and the Republic of China was created.  However, opposing ideologies soon led to a civil war that was fought intermittently between the Kuomintang (Nationalists) and the Communists from 1927 to 1937, when both fractions oddly joined forces to fight the Japanese invasion, which became part of the World War II.  Sadly, when China emerged as one of the victor-nations at the end of global conflict, the civil war resumed in 1946 until 1950, when the Kuomintang government’s Republic of China retreated to Taiwan, leaving mainland China to the Communists, who had established the People’s Republic of China one year earlier in 1949.

As part of the Communist China’s state economic plans, the People's Construction Bank of China was established in 1954 as a wholly state-owned financing agency under the direction of the Ministry of Finance to administer and disburse government funds for the construction of infrastructure-related projects. 

In 1979, under China’s new ‘open-door’ policy to modernize its economy and to promote manufacturing and foreign trade, the People's Construction Bank of China became a financial institution under the direction of the State Council and gradually assumed more commercial banking functions that are typically associated with the Western-capitalist definition of a bank.

Throughout the 1980s, China Construction Bank gradually became a full-service bank, offering more and more personal banking services for individuals while maintaining its other mandate of financing state-planned infrastructure development.  This finally changed in 1994 when state-policy-driven, infrastructure-related financing functions were transferred to the newly-created China Development Bank.

In 1996, the People’s Construction Bank of China was renamed China Construction Bank.  By this time, China had been gradually transforming itself from a pure communist state to what it described as the Chinese-style Socialism: basically a form of socio-political system that is roughly half-way between the 1950s hard line communism and the Western capitalist democracy.  Under this Chinese-style socialist market-economy is a system that is still largely state-planned and controlled, but with a semi-market-driven decision-making process; goods and services are largely produced by state-owned enterprises yet with partial private investment and ownership.  Increasingly, individuals are allowed and even encouraged to own personal properties, assets and investments. Yet, unlike the Western capitalist democratic system, universal suffrage is not allowed.

China Construction Bank became a joint-stock commercial bank with limited liability in September 2004 as China prepared to partially float its Big Four state-owned commercial banks on the stock market. To bring the bank’s Tier 1 capital level to the internationally-accepted level of 8%, the Chinese government is said to have injected USD $22.5-billion into China Construction Bank in 2003.  Meanwhile, ownership of China Construction Bank and other major state-owned banks and financial services firms was transferred to a state agency called Central Huijin Investment Ltd.

As China was still inexperienced in managing its own stock exchange, securities underwriting and regulation, essentially all of China’s major state-owned enterprises were initially floated on the Hong Kong stock exchange instead of a Chinese stock market during the early 2000s. 

Following a HKD $71.5-billion (USD $9.2-billion) stock sale, China Construction Bank's class ‘H’ shares were listed on Hong Kong Stock Exchange on 2015-10-27, and on 2007-09-25, the bank's class ‘A’ were listed on Shanghai Stock Exchange, raising another CNY 58-billion (USD $7.7-billion).

Recent transaction(s):

• In 2006, China Construction Bank bought Bank of America's Hong Kong retail banking operations for HKD $9.7-billion (USD $1.25-billion).
• In November 2014, CCB bought 72% of Brazil’s Banco Industrial e Comercial S.A. (BicBanco) for USD $723-million (BRL 1.62-billion).  BicBanco specialized in lending to medium-sized businesses through 38 branches in Brazil and one in the Cayman Islands.  The bank had 900 employees.

Click here to return to the Index page.

Sweden Bank Mergers & Acquisitions (Svenska Handelsbanken)

Photo: Svenska Handelsbanken's head office in Stockholm.

Photographer: Bengt Wanselius.  Source: Svenska Handelsbanken's web site, used with permission.

Svenska Handelsbanken AB

In Scandinavian, German and Dutch languages, the word "handel" means a trade or business, as in the chemicals trade or the forestry trade. The name Svenska Handelsbanken, hence, means the "Swedish Commercial Bank". The bank was established in 1871 by eight former directors from rival Stockholms Enskilda Bank who resigned to form their own bank following a board disagreement.  Initially, the bank was called Stockholms Handelsbank, focusing on accepting deposits and making loans to businesses in the Swedish capital. The bank was floated on the Stockholm stock exchange in 1873. 

The bank began to open branches in other parts of Stockholm in 1875.  During the mid-1880s, Sweden suffered a major economic recession due to a real estate collapse.  Stockholms Handelsbank suffered losses, but survived the downturn. 

In 1893, private banker Louis Fraenckel was appointed to the bank’s managing director position.  His tenure lasted until 1911, during which his own private banking operations were amalgamated into Stockholms Handelsbank, allowing it to gain important corporate clients and to expand into the foreign exchange business.  During the 19^th century, branch banking was not a common practice in many countries, and instead of directly operating a network of branches outside of Stockholm, the bank chose to partner with local investors in establishing a number of regional banks to share risk and to optimize local expertise.

However, by the early 20^th century, industrialization has created large corporations with nationwide operations and even multi-nationals that required much larger capital, trade finance and international services.  Small regional banks could no longer serve such ever-expanding industrials.  Waves of bank mergers happened across Western Europe and America, and Sweden was no exception.  In 1914, Stockholms Handelsbank took over Bank AB Norra Sverige. This expanded Stockholms Handelsbanken’s reach to 36 new towns, primarily along the Norrland coast where Sweden’s forestry industry was concentrated. 

Then in 1917, the bank further strengthened its position in the north by acquiring Norrlandsbanken, which had 79 branches.  Before long though, the bank realized that its loan concentration in the Swedish North and forestry industry gave it undue credit risk.  The bank then opened branches in Göteborg and Malmö, and in 1919 expanded to the south by acquiring the 67-branch Bank AB Södra Sverige.   To celebrate this nationwide expansion, Stockholms Handelsbank adopted its current name: Svenska Handelsbanken.

The 1920s and 1930s was turbulent times for the world economy, with asset prices and consumption swinging wildly, and Sweden’s export volumes and economy rode along the roller-coaster ride.  Svenska Handelsbanken on several occasions had to take over the majority ownership of its industrial clients while their bad debts were re-structured.  A famous name that the bank owned for a period of time was telecommunications engineering firm LM Ericsson.  Amidst the very challenging operating environment, the bank took over Mälarebanken in 1926.

The closing months of the 1930s saw the start of World War II when Germany invaded Poland on September 1, 1939, and the subsequent declarations of war on Germany by France and Great Britain two days later.  British Prime Minister Neville Chamberlain had pledged support for Poland back in March 1939, when Germany’s military hostilities became obvious. At the outbreak of conflicts, Sweden declared its neutrality, a move that failed to prevent socio-economic hardship as its western, southern and eastern neighbours (Norway, Denmark and Finland) all fell to Nazi German occupation at the height of World War II.

Situated at a strategic location between Great Britain, Germany, Denmark and the Soviet Union, Sweden’s access to both the North and Baltic Seas were severely curtailed by both the Allied Forces’ and the Axis’ naval blockades, as both sides feared that the other powers would use the pretense of Swedish neutrality to aid their respective war efforts.  Foreign trade in and out of Sweden fell sharply, leading to severe shortages of petroleum, rubber, foods and metal products.  Notwithstanding the economic distress, Sweden did avoid the devastating human toll and physical destruction of other European countries that endured years of battles.

Svenska Handelsbanken continued to strengthen during the 1940s, taking over Norrkopings Folkbank in 1941 and Vänersborgsbanken in 1943.  In 1955, Svenska Handelsbanken acquired mortgage provider SIGAB, which became today’s Handelsbanken Hypotek.  During the rest of the 1950s, it also took over Luleå Folkbank and Gotlandsbanken. 

In 1963, Svenska Handelsbanken became the first Swedish bank to launch a lease-finance and factoring services subsidiary when it established Säljfinans, which became Svenska Finans in 1973 and Handelsbanken Finans in 1991.  The 1960s also witnessed the start of computerization to handle the burgeoning volume of transactions.  Computer terminals at the individual branch level began in 1973, allowing immediate account balance updates for the first time. 

The year 1973 also marked an important milestone for the bank’s management-employee relations, as Svenska Handelsbanken launched a profit-sharing program for its union employees. The funds allocated from the profit-sharing were invested in the bank's shares, which eventually gave the union foundation representation in the bank’s board of directors.

Svenska Handelsbanken’s mutual fund offerings began in 1971 when it acquired a sales agency that handled the “Koncentra” mutual fund series.  That operation evolved into today’s asset manager Handelsbanken Fonder ("Handelsbanken Funds").

The 1980s was tumultuous times in the Swedish economy and banking industry.  Tight regulations that had been in place since World War II on interest rates, credit ceilings, foreign exchange rate as well as the types of savings and loan products that each of the three categories of credit institutions (savings banks, co-operative banks and commercial banks) could provide were gradually removed.  This liberalization policy led to a proliferation of loan volumes, as players in all three credit institution categories tried to grab market share from each other by offering easier and easier credit. Much of the new debt fuelled speculative commercial real estate construction activities, which went bust in 1990 when Sweden was hit by a deep recession brought on partly by the collapse of its traditional export markets in the disintegrating Soviet Bloc and rising interest rates. 

Speculative corporate loans made in the late 1980s suddenly turned sour and Sweden plunged into a severe currency and banking crisis which saw the national government providing SEK 66-billion of state guarantees to prevent a colossal collapse of the banking sector.  The more cautiously-run Svenska Handelsbanken, however, stood out as the only major Swedish bank that did not request any handout from the government. Indeed throughout the 1990s, its capital position was so strong that it acquired ailing banks domestically and in Norway and Finland, both of which suffered their own similar banking crises as Sweden. Outside of the Nordic region, Svenska Handelsbanken considers Great Britain and the Netherlands as its home markets, operating 180 branches and 22 branches respectively (accurate as of 2014). In recent years, the bank has often purposely omitted the “Svenska” part of the formal name, marketing itself as “Handelsbanken” instead.

Recent transaction(s):

• In 1990, Handelsbanken acquired Malmö-based Skänska Banken, which had 76 branches.
• Also in 1990, Handelsbanken bought Norway's Oslo Handelsbanken.
• In 1991, Handelsbanken bought Stavanger Bank of Norway.
• In 1995, Handelsbanken bought the healthy parts of Finland's Skopbank.
• In 1997, Handelsbanken bought Swedish mortgage provider Stadshypotek AB for SEK 23.0-billion (USD $3.28-billion).
• In 1998, Handelsbanken offered NOK 5.09-billion (SEK 5.44-billion, USD $690-million) for Norway's Fokus Bank. However, within days, Denmark's Den Danske Bank jumped into the foray. After a brief but intense bidding war, Den Danske Bank raised its offer for Fokus to NOK 5.815-billion (SEK 6.222-billion, USD $778-million) and won the Norwegian bank.
• In 1999, Handelsbanken bought Norway's Bergensbanken for NOK 1.55-billion (SEK 1.69-billion, USD $200-million). Bergensbanken had 6 branches in Bergen, the second largest city in Norway.
• In 2000, Handelsbanken bought Swedish mutual life insurer and pension fund manager SPP Livförsäkring AB and SPP Fonder AB for SEK 7.1-billion (USD $734-million). The Swedish bank planned to demutualize SPP as soon as feasible.
• In 2001, Handelsbanken bought Denmark's Midtbank A/S for SEK 2.5-billion (DKK 2.05-billion, USD $245-million). Midtbank had a strong presence in Denmark's Jutland region.
• In 2006, Handelsbanken's SPP Liv was demutualized, and surpluses totalling SEK 2.5-billion (USD $326-million) were distributed to the policyholders.
• In late 2007, Handelsbanken sold its Swedish-based insurance and pensions division SPP to Norway's Storebrand Holding AB for SEK 18.2-billion (EUR 2.6-billion, USD $2.62-billion).

Click here to return to the index page.