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Bulk is back

Bigger is better.

Bigger is better. This slogan of the globalization era lost some of its resonance during the bear market, but with equities resurgent, it's being spoken again -- especially within banks. The proposed merger of J.P. Morgan Chase & Co. and Bank One Corp., following the recent Bank of America Corp.­FleetBoston Financial Corp. deal, will create two banking giants with the resources to compete anywhere in the world.

Many banks, particularly in Europe, where scale is traditionally measured against the size of a national market, are asking themselves how they can keep pace. For Baudouin Prot, the CEO of BNP Paribas, the answer is simple: More of the same. Prot has helped turn BNP Paribas into the euro zone's most valuable bank by aggressively leveraging its existing customer base and judiciously expanding through acquisitions. While many bankers are wondering if this will finally be the year of cross-border bank mergers in Europe, Prot already boasts pan-European franchises in consumer finance and online brokerage. As Staff Writer David Lanchner notes ("Seasoned Prot," page 36), the CEO is looking to grow BNP Paribas through smaller, bolt-on acquisitions both in Europe and the U.S., where the French bank owns California-based BancWest Corp. Such deals, Prot says, are more likely to enhance the bank's existing business than a risky blockbuster merger.

It's a sound strategy, but one not easily executed. Like that of other perceived acquirers, BNP Paribas's stock has taken on a predator's discount -- its price-earnings multiple is nearly 20 percent below the European bank average. Prot, who has been CEO for less than a year, isn't asking to be taken at his word, though. During his seven years as chief operating officer under Michel Pébereau, he established a track record for setting tough financial targets to pursue acquisitions, including BNP's 1999 purchase of Paribas. Investors hope that Prot can sustain the pace.

This month for the first time, Institutional Investor is publishing a separate ranking of the best analysts covering Europe's emerging markets (page 61). With ten Eastern and Southern European countries set to join the European Union in May, now is an ideal time to assess which brokerage researchers are doing top-notch work in the region. Joining the EU, of course, is no guarantee of prosperity. As our story (page 43) relates, EU candidate Poland is under pressure from investors to enact tough economic reforms that it has avoided for years. It's a subject worth analyzing.