Which governments earned the most from privatization
Bank privatization is an opportunity to consolidate the sector and transform it, which may cause the industry to start making up for losses to the largest US lenders. The sales should lead EU banks to pursue more aggressive strategies that are less risk-controlled than they currently are.
European governments have sold shares of banks rescued in the past worth around EUR 13 billion this year. This is the fastest pace of privatization since the end of the financial crisis. While governments have meanwhile gained billions of dollars in bank dividends, even the sales are unlikely to recover all the money spent on rescuing lenders.
The British government made the most money by far (5.4 billion euros). Next on this list are Ireland (2.7 billion euros), Greece (2 billion euros) and Netherlands, Italy and Germany (1.4 billion euros).
The trend is strong. As recently as 2019 and 2020, European governments did not sell any significant stakes in major banks (Bloomberg included 10 lenders). In 2022, the value of such sales slightly exceeded EUR 5 billion, and in 2023 it was slightly below EUR 10 billion. This year is record-breaking, and we haven’t finished the year yet.
Governments are privatizing at the perfect time
This is the perfect time to sell banks. We have just passed the peak of the interest rate increase cycle and are entering the phase of lowering them. This also applies to the EU and the European Central Bank. Banks have significantly improved their financial situation during several years of high loan costs, which has allowed them to clean up their balance sheets of low-quality loans. This applies primarily to entities from Greece, Italy and Spain.
An interesting example are Greek banks, which had huge problems in the previous decade, but are now among the most desirable assets in Europe.
Privatization of banks may also be a problem because: there is a risk that foreign capital will take control of the bank. Such a situation occurred when a German bank sold shares of Commerzbank, a significant part of which wanted to be acquired by the Italian UniCredit. The next target of a “hostile” takeover may be the Dutch ABN Amro Bank NV.