Competition Eats the Profits of Big Shaky Banks in Euroland: So Consolidate

The plan: Take out mid-sized banks to create a “bipolar” industry of large and small banks, and a lot less competition.

Barely nine months have passed since Spain’s sole officially too-big-to-fail bank, Banco Santander, took over its collapsed rival, Banco Popular, in a shotgun marriage hastily endorsed by panicked Spanish and EU authorities. Santander still hasn’t even fully digested Popular’s assets, yet it already has its sights set on new takeover targets.

In a speech to shareholders the bank’s president, Patricia Ana Botín, stressed the lender’s capacity for “organic growth” but she also refused to rule out the possibility of fresh acquisitions. “We have the obligation to analyze the opportunities for external growth that arise in our markets and that could strengthen our business,” she said.

The speech comes at a time that Goldman Sachs is predicting a new round of consolidation in Spain’s financial sector. After the acquisitions of Popular (by Santander) and BMN (by Bankia) last year, the first cycle of the consolidation process of Spanish banking is almost complete, Goldman said in a recent note to investors. Now, a second cycle, designed to capture new efficiency gains, can begin

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