And Credit Agricole and Santander are merging their custody and asset servicing arms.
Four of the six largest American banks have released their first-quarter financial results over the past week with J.P. Morgan and Wells Fargo reporting quarterly profit and revenue that exceeded analysts’ expectations and Goldman Sachs and Citigroup both missing estimates on their revenue.
“When we look at profitability, particularly net interest margins ... we think we’re at peak margins right now, we think this is as good as it gets both in terms of net interest margins and profitability,” he told CNBC’s “Capital Connection” on Tuesday.
The potential absence of further interest rates increases by the Fed means that banks may not be able to charge more on loans in the coming months.
“If we don’t see more rate raises, which is likely ... that’s not great news for margins going ahead,” said Ghose.
Deutsche Bank AG estimates it could lose the equivalent of almost a fifth of Commerzbank AG’s annual revenue should it go ahead with a takeover of the lender, another potential sticking point for a deal that’s run into hurdles of late.
Customers seeking to reduce their exposure to the combined lender could pull business worth 1 billion euros to 1.5 billion euros ($1.1 billion to $1.7 billion), people familiar with the matter said. The estimate is a key factor in deciding whether a deal makes sense, the people said, asking not to be identified in discussing internal deliberations.
The loss of business and expected restructuring costs would have to be offset over time by cost savings, currently estimated at about 40 percent of Commerzbank’s cost base, or 2.7 billion euros, the people said.
France’s Credit Agricole and Spain’s Santander plan to combine their custody and asset servicing operations to create a business with around $3.8t of assets under custody and close the gap on European leaders.
The banks said in a joint statement the new entity would have about 3,340 billion euros ($3.8 trillion) in assets under custody and about $2.08t (EUR1,833b) in assets under administration.
Credit Agricole will own 69.5% of the merged unit, which will keep the brand name of Agricole’s existing asset management arm - Caceis and Santander will hold 30.5%.
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