European Crisis Offers Opportunities for U.S. Banks

The lead story in today’s New York Times, “American Firms See Europe Woes as Opportunities,” provides a superb case study of how the business world works. Even as the European euro crisis unfolds, American companies are finding investment opportunities overseas and taking advantage of the situation to buy up assets that European banks are trying to unload.

It’s estimated that European banks will need to unload about $3 trillion in assets over the next 18 months in order to meet a requirement by the European Central Bank to improve their balance sheets and increase their “Tier 1 capital ratio” to nine percent of assets.

American banks including JP Morgan Chase and Wells Fargo as well as U.S. corporations such as Google are finding investment opportunities overseas since the Euro crisis has hurt strong companies with otherwise solid fundamentals. So, in some sense, the United States is coming to the rescue of Europe again, even though it is not being conducted on a government-to-government basis.

And that is how things work in the business world. Companies evaluate whether opportunities are underpriced, and, if so, they swoop in with the hopes of making a profit. It is the data, the impartial evaluation of organizations that can’t be swayed by any hype (positive or negative) that makes a difference.