Trups CDO manager targets Europe

EJF Capital is eyeing opportunities in Europe, as bank consolidation pressures grow and rates continue to rise. However, the firm’s plans remain at an early stage, given that European consolidation lags behind that of US banks.

According to Omer Ijaz, md at EJF Capital: “We have set eyes on Europe, where we are seeing opportunities emerge in light of recent regulatory and market developments. However, opportunities are in their nascent stages, given that Europe lags behind the US in terms of consolidation. Regulatory pressures for consolidation and rising rates are catalysts for these opportunities going forward.”

Scope Ratings suggests that a major obstacle to further banking consolidation in Europe has been the lack of a supervisory level playing field, despite evolutionary improvements. Banks remain concerned about the regulatory and political treatment of cross-border mergers, including uncertainties about resolution structures or the possibility of capital and liquidity ring-fencing across jurisdictions, within or outside the EU.

EFJ’s shift to Trups CDOs began in 2011, but it became the firm’s core focus in 2015. Driving the shift has been the deregulation in the US community bank sector.

“We believe the regulatory costs for these banks are high and consolidation allows them access to the capital markets and a consequent cheaper cost of capital,” says Ijaz. Examples of such consolidation include the recent merger between SunTrust and BB&T.

Stelios Papadopoulos