European banks fall behind US lenders in gender diversity

London

SO DIVERGENT have their fortunes been since the financial crisis, European banks tend to trail their Wall Street peers on most of the metrics that investors care about. Gender diversity at the top might be the next lagging indicator.

There are rare bright spots in Europe. Royal Bank of Scotland Group plc on Friday promoted Alison Rose to chief executive officer, the first woman to run a big UK lender. Spain's Banco Santander SA is chaired by Ana Botin. Cast the net a bit wider, and things start to look thin.

With Ms Rose's appointment, RBS becomes truly one of a kind. Its finance director is also a woman, Katie Murray, which is another rarity in European banking.

Although no woman has run a big Wall Street outfit, some American banks have made real strides in promoting women to top management positions. They will be well-placed to make the transition to CEO soon, possibly as soon as the next round of promotions.

Take JPMorgan Chase & Co. Its CEO Jamie Dimon has seen several potential male successors depart during his reign. But the bank's operating committee is now 50 per cent female, with women in charge of consumer lending, the company's finances and the asset management unit. At Bank of America Corp, 40 per cent of the leadership team is female, including the chief operating and technology officer.

The statistics are not as compelling at Citigroup Inc, where 31 per cent of the leadership is female, nor at Goldman Sachs Group Inc, where it is 29 per cent. But the contrast with Europe's titans is still striking.

At Santander, 23 per cent of managers are women; at HSBC Holdings plc, it is 13 per cent; and it is 15 per cent at BNP Paribas SA. At Barclays plc, just one of its 13 executive committee members is female; while at UBS Group AG, the 13-strong management team is only now gaining two more female members, bringing the total to three.

Beyond the general acceptance that businesses are nicer places to work when they are more diverse, financial returns also improve markedly the less they are dominated by white males with privileged backgrounds. Research from Morgan Stanley shows that shares in companies with a higher degree of gender diversity outperformed less diverse peers by 3.1 per cent per year in the past eight years (2011-2019). The US bank, whose own management team could do with acting on these findings, calculated diversity by using the number of female board members, executives, managers and employees, giving each an equal weighting.

The bigger cost to banks could come from losing out on money from asset managers, who are increasingly demanding diversity at their holdings as part of a shift towards more carefully targeted investment.

Indeed, the substantial growth of "environmental, social and governance" investments in recent years owes a great deal to finance industry leaders. As such, their own conduct should be beyond reproach. Falling behind on diversity may be another reason for investors to favour US banks over their European peers. BLOOMBERG