Executives predict more overseas bank deals

Bank of America said on Tuesday there would be more mergers between U.S. and European banks, and that the U.S. bank would benefit from rising U.S. interest rates.

"There will be more consolidation in the financial services industry and that will include intercontinental mergers," Charles Gifford, Chairman of Bank America, Boston, told Reuters.

"Whether it be Bank of America or anybody else, people are (talking about) whether there will be mergers on both sides," he said on the sidelines of a conference in London.

He declined to comment on specific possible deals, including whether the bank would be interested in buying British broker Cazenove.

Bank of America started a wave of U.S. consolidation last year when it announced its $47 billion takeover of FleetBoston, and some European rivals are concerned about the threat from the giants being created in the United States.

Meanwhile Britain's Royal Bank of Scotland Group Plc and HSBC Holdings Plc have been expanding their U.S. operations.

Royal Bank announced its $10.5 billion takeover of Charter One last month and HSBC is expanding Household, the U.S. consumer finance business it bought last year.

"The largest financial services organizations are constantly looking at their options," Gifford said. "When markets are strong, and they look strong now, there can be hesitancy among potential sellers," he cautioned.

Speaking at the same conference, Commmerbank Chairman Klaus-Peter Muller said the consolidation among U.S. banks was increasing the pressure on European and other international banks to consider cross-border deals.

"What I am saying is the outside pressures are increasing (on European banks to consolidate)," he said, though he did not have the "perfect answer" on when it would begin.

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The head of Britain's third-biggest bank, Barclays Plc, said it could happen within five years.

"All the conditions pointing to the benefits of consolidation...for the industry and economies are in place," Barclays Chief Executive Matt Barrett told reporters.

"The accelerating consolidation in the U.S. is lending more impetus to the dialogue (among European banks). Within the next five years you will see cross-border alliances...and mergers and acquisitions."

He declined to comment on whether Barclays would be interested in combining with Germany's Deutsche Bank, noting that "most of the time such rumors are ridiculous".

With U.S. interest rates set to rise, investors have been concerned that banks' profit growth will stall as customers rein in their borrowing, but Bank of America's Gifford said his company would gain from rising interest rates.

"There is a false paradigm that rising rates are bad for banks. That is not the case for Bank of America," Gifford said. "We have made it so that the sensitivity of our balance sheet is positively impacted by rising rates."