``There will be more bank consolidation and asset sales as people are forced to take tough decisions,'' said Philip Keevil, a senior partner in London at Compass Advisers LLP and former Salomon Smith Barney Inc. banker. ``It will be the weak offering themselves to the strong.''
Barclays Plc agreed today to buy Lehman's U.S. investment banking unit for $1.75 billion, three days after abandoning plans to acquire the entire securities firm. American International Group Inc., which received an $85 billion bailout from the U.S. government yesterday, is most likely to repay the loan by liquidating or selling assets, central bank officials told reporters on the condition of anonymity.
``We are now entering the next phase of the crisis, one that may require forced consolidation,'' UBS AG analyst Philip Finch said in a note to clients this week. The broker-dealer model used by investment banks is broken, and history suggests more banks will fail or be forced to merge following Lehman's collapse, he added.
Banks and insurers worldwide have booked more than $510 billion in losses and writedowns since the global credit crisis began about 13 months ago, wiping about $11 trillion from the value of global stocks along the way. That has prompted banks to seek cash injections and sell assets to shore up capital. Bank of America's $40 billion takeover of Merrill is the biggest element of $71 billion in acquisitions announced this month alone, almost twice the amount in the same period a year ago, data compiled by Bloomberg show.
HBOS Sale Talks
Lloyds TSB Group Plc, the bank that considered buying Northern Rock Plc before it collapsed, is in discussions to buy HBOS Plc after the mortgage lender lost three quarters of its stock market value this year.
The banks are in ``advanced talks,'' Edinburgh-based HBOS said in a statement today, without disclosing any details. A combination with Lloyds, based in London, would create a lender with a 28 percent share of the U.K. mortgage market, according to the Council of Mortgage Lenders.
``All these banks are going to have to clean up their balance sheets,'' said Bernard Gault, a London-based partner of Perella Weinberg Partners LLP. ``People are going to have to decide what to do next.''
Buyers may seek all or parts of Washington Mutual Inc., whose credit rating was cut to junk on Sept. 15, analysts and investors say. In the U.K., HBOS and Royal Bank of Scotland Plc were both earlier this year seeking to sell divisions.
Capital Raising
Seattle-based Washington Mutual has dropped 83 percent so far this year, leaving the lender with a market value of about $4 billion. Facing up to $19 billion in bad loans over the next 2 1/2 years, the bank may be forced to sell all or part of itself to raise capital, according to analysts including Bert Ely, president of consulting firm Ely & Co. in Alexandria, Virginia. The banks may also have to sell parts of a nationwide 2,300-branch network to raise capital.
Edinburgh-based HBOS has also been exploring a sale of its Australian units that may raise as much $5.7 billion, three people familiar with the plan have said.
``There will be those looking to take advantage of the crisis,'' said Charles Arsouze, a lawyer specializing in M&A, capital markets and securities law proceedings at Paris-based Fontaine Mitrani & Associates.
Edgy Buyers
Buyers are still skittish. In Europe, Royal Bank of Scotland has been struggling to sell its insurance units to bolster capital after reserves were depleted by writedowns and the purchase of part of ABN Amro Holding NV last year. Commonwealth Bank of Australia scrapped talks last month to buy ABN Amro's investment banking and corporate finance units in Australia and New Zealand, citing financial market turmoil.
UBS's Finch said banks that stand to benefit most from potential consolidation are Credit Suisse Group, JPMorgan Chase & Co. and HSBC Holdings Plc.
``The companies that are doing deals today are saying things have been way too expensive until now,'' said Gault of Perella Weinberg Partners. ``And it's time to do something.
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