Have you noticed how people talk about disruption more and more, and note the collapse of companies like Blockbuster, Kodak, Nokia and Thomas Cook? In fact, there are more companies entering and leaving the stock market lists than ever before, with the average tenancy now under two decades compared to six decades or more in mid-1950s.
A 2015 McKinsey study found that the average corporate life span has been falling for more than half a century by analysing Standard & Poor’s data, which shows a company’s survival was 61 years in 1958, 25 years in 1980, and just 18 years in 2011.
Change is faster, the challenges bigger, the need to adapt greater and the environment far harder than ever before.
This is perhaps best exemplified by a headline that caught my attention a few months ago:
On August 24, 2020, Salesforce, Amgen and Honeywell were added to the Dow, replacing Exxon-Mobil, Pfizer and Raytheon Technologies.
So sad, but companies are not built to last forever. They come and go with the flavours, tastes and the needs of society.
But this is not true for banks.
Banks last forever.
This is well illustrated by a comment from challenger bank Varo, who are seeking a national bank charter in America.
Varo is betting that looking more like a traditional bank will pay off in the long term. “It’s really the only long-term sustainable route if you want to be around 50 to 100 years from now,” said Colin Walsh, chief executive of Varo.
It’s that old nugget around you need to be a bank to do banking and, to be a bank, you need a license. That license is your trust. Without that license, you cannot be a bank and, to get a license, means you must be strong and stable … and around for 100 years therefore.
When I look at the biggest banks in most countries, they’ve been a big bank in that country for a very long time. Some banks have been around for over half a millennia (Monte Paschi di Siena) and Britain’s oldest surviving bank, Barclays, appeared in 1692.
Banks don’t die. They may be zombies, failed, broken, wrong, stupid, dumb or whatever other words you want to use, but you can’t kill them.
The main reason this is the case is because they are protected by governments. Left or right governments want strong and stable banks to ensure a strong and stable economy. Therefore, they protect these treasured assets like no other companies. For this reason, banks live forever.
They can be acquired …
Monty Python fans will get this:
A friend of mine was shocked when Banco Sabadell took over TSB …
… no one expects a Spanish acquisition
— Chris Skinner (@Chris_Skinner) November 1, 2020
… merged, sold and more, but they never die. Most banks that were around a century ago, are still around today.
1472: Banca Monte dei Paschi di Siena, Siena, Italy
1590: Berenberg Bank, Hamburg, Germany
1668: Sveriges Riksbank, Stockholm, Sweden
1672: C. Hoare & Co., London
1674: Metzler Bank, Frankfurt, Germany
1690: Barclays, London
1692: Coutts, London
1694: Bank of England, London
1695: Bank of Scotland, Edinburgh, United Kingdom
1702: Caja Madrid, Madrid, Spain
1712: Drummonds Bank, London, United Kingdom
1727: Royal Bank of Scotland, Edinburgh, United Kingdom
1737: Van Lanschot, ‘s-Hertogenbosch, Netherlands
1747: Banque Nagelmackers, Brussels, Belgium
1760: Banque Courtois, Toulouse, France
1765: Lloyds Bank, London
1774: Fürstlich Castell’sche Bank, Würzburg, Germany
1780: Landolt & Cie, Lausanne, Switzerland
1783: Bank of Ireland, Dublin, Ireland
1784: The Bank of New York/BNY Mellon, New York City
So, don’t give me this hogwash about banks will die. They won’t. They’re bullet-proof. They last forever.
In 2040, do you think most of today’s big banks will still be around?
— Chris Skinner (@Chris_Skinner) November 8, 2020