2010 - A Year Of Banking Dangerously

From recovery in Asia to hot growth in Latin America to seemingly near-collapse in Europe, it is a yeoman's task to try to sum up the 2010 world of international banking in under 800 words. Perhaps, though, that is the summation; Asia came back, Latin America never left and Europe struggled to hang on through the latest crisis. Suffice it to say, it sets the table for an interesting 2011. 

Asia - Been There, Done That, Learned the Lesson
To some extent, it is probably fair to say that between Japan's property bubble-fueled bank bubble and collapse (and a 20-year zombie economy), Hong Kong's boom-bust real estate markets and Southeast Asia's debt-fueled over-expansion of past decades, Asian bankers had already seen this movie before. Consequently, while the decline of global trade during the Great Recession did no favors for these economies, the underlying models were in better shape and 2010 saw good rebounds in many markets. (For more, see 7 Ways To Position Yourself For Recovery.)

Publicly-traded Korean banks like KB Financial (NYSE:KB) and Woori (NYSE:WF) lagged the U.S. S&P 500 (Shinhan (NYSE:SHG) outperformed), but were still up for the year and did quite a bit better than American banks on the whole. Japanese banks like Mitsubishi UFJ (NYSE:MTU) and Mizuho (NYSE:MFG) were likewise "yeah, but" performers - yeah, they did better than most American banks, but still not all that well.

Elsewhere in Asia, there was substantially better performance. Indian wonder twins ICICI (NYSE:IBN) and HDFC (NYSE:HDB) were strong stocks this year, as was Australia & New Zealand Banking Group (Nasdaq: ANZBY.PK). While China's efforts to cool inflation impacted the likes of China Construction Bank, Industrial & Commercial Bank, and Bank of China, the share price performance still holds up relative to many regional U.S. banks.


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FinancialEdge: The Story Behind The Irish Meltdown

Ireland just cannot seem to catch a break. There is a long thread of tragedy and melancholy that runs through Ireland's history, and recent economic developments would seem to suggest that the more things change, the more they stay the same. For now, the country once known as the Celtic Tiger is facing hard times once again and prosperity seems a long way away. (For related reading, take a look at Why U.S. Investors Should Care About "PIGS".)

The Irish Miracle
Ireland does not have a long history of economic success. Economists and historians still argue about the reasons why, but Ireland never really participated in the industrial revolution, and the well-known famine in the 1800s began a pace of mass migration that lasted more than 100 years. Simply put, Ireland spent much of the 20th century as a relatively poor (at least by Western European standards), largely agricultural country with a large public sector and heavy state involvement in the economy.

All of that started to change in the 1990s. The national government reduced its direct involvement in the economy, brokered social partnerships between business, unions and itself, significantly cut corporate taxes, and actively encouraged export-focused industry. The result was nothing short of remarkable - Ireland produced GDP growth on par with Asian growth stars like South Korea, Taiwan and Hong Kong, unemployment fell, and the government found itself able to invest in social services like education and infrastructure.


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M&T Bank Buys Scratch-And-Dent Wilmington Trust

For most of the year, M&T Bank (NYSE:MTB) has found itself the subject of unwelcomed speculation that the bank was an acquisition target of Banco Santander (NYSE:STD). With Allied Irish Banks' (NYSE:AIB) decision to publicly distribute its stake in MTB to shareholders, that speculation has largely died away, and in an interesting twist, M&T has become an opportunistic buyer of another bank. 

The Deal
M&T announced that it had reached an agreement to acquire Delaware-based Wilmington Trust (NYSE:WL) in an all-stock deal. In offering about 0.05 shares for each WL share, MTB management was valuing Wilmington at $3.84 a share on the basis of Friday's close. The fact that Wilmington reported earnings Monday morning and stated that tangible book value had fallen to $3.84 seems like a little more than just coincidence.

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