Banks need to respond to rapidly changing customer preferences, digital interfaces and platform businesses to thrive post-crisis

Published 

LONDON – While the performance of European banks has recovered from the lows of 2008, their average return on capital of 4.4% remains well below the minimum expected rate of return, according to new report, Beyond Restructuring: The New Agenda – European Banking 2017, by global management consultancy Oliver Wyman.

The report charts the progress European banks have made in responding to the commercial and regulatory consequences of the crisis in the last decade; noting that there are large geographic differences. Banks in some EU markets have completed this restructuring process, whilst other markets continue to struggle.

Whatever their progress on the restructuring agenda, all of Europe’s banks now find themselves having to deal with a rapidly changing environment. New customer preferences, digital interfaces and platform businesses are changing how customers bank – a trend that will be accelerated by regulators’ push for open banking. At the same time, automation and data tools are creating the opportunity and imperative to significantly cut cost bases.

Lindsey Naylor, partner at Oliver Wyman and lead author of the report, says: “Europe’s banks have spent the last nine years working hard to recover from the financial crisis, repairing their balance sheets, making the changes demanded by new regulations and exiting structurally unprofitable businesses, all in a low growth context. There is a strong possibility that Europe’s banks will emerge from the crisis only to see a whole new set of challenges that may require changes to the banking business model itself. The new agenda will demand innovative answers beyond the restructuring that has taken place so far”.

The report’s highlights include:

  • Banks have been forced to increase capital and shrink balance sheets, resulting in average capital ratios increasing from 3.7 to 5.8 percent (Tier 1 capital/ (IFRS) assets). Further work is now in train on MiFID II, Brexit, and recovery and resolution planning.
  • Good progress has been made on exiting unprofitable businesses, both from a business line and a geographic perspective, as banks have moved away from non-core markets. Oliver Wyman estimates that in wholesale banking, European banks have exited lines of business that generated annual revenue of €10 BN in 2009.
  • Waves of cost savings programmes have been announced to increase operational efficiency, but nevertheless nominal bank expenditure grew at 1% per year 2008 to 2016 and Cost/Income ratios barely moved, as revenues shrank in the same timeframe due to low interest rate environment and squeezed margins.
  • While some European markets have been transformed by a consolidation wave, others have barely moved in this period. Greece and Spain have seen concentration double since the crisis and Italy has seen significant activity over the past year. Cross-border consolidation remains limited.

  

Most recent episodes

£15 Billion Stimulus Pumped into UK Economy to Ward Off Recession Fears

Welcome to the latest edition of Liquidity Link Live, your exclusive market analysis provided by Northern Trust Asset Management, one of the world’s largest cash managers. Tune in each month to discover the very latest insights on the UK, Eurozone and US markets. This edition was recorded on the 7th June...

04:44

Advantage Treasury

Eleanor Hill is joined in the virtual TreasuryCast studio by Nicolas Cailly and Philippe Penichou (Societe Generale) to look at treasury trend predictions for the remainder of 2022, with a particular focus on virtual accounts. In this deep dive into current and future treasury priorities, our guests...

24:22

40th Annual New York Cash Exchange: What Can Treasurers Expect?

Ahead of the 40th annual New York Cash Exchange, two of TMANY's distinguished board members, David Miller and Timothy T. Hesler, CTP, provide TMI CEO, Robin Page, with a quickfire rundown of what attendees can expect from this year’s conference. Our guests share their aspirations for the event, explain...

09:58

Expectation-Beating Inflation Prints Ratchet Up Pressure on Monetary Policy

Welcome to the third edition of Liquidity Link Live, your exclusive market analysis provided by Northern Trust Asset Management, one of the world’s largest cash managers. Tune in each month to discover the very latest insights on the UK, Eurozone and US markets. This edition was recorded on the 9th May...

04:48

Making the Sustainable Transition: A Roadmap to ESG in Treasury

Over the last 18 months, Societe Generale has experienced a steady increase in requests from their corporate clients to integrate ESG features in treasury management.  Louis-David Rouyer, Philippe Pougeard, and Emmanuelle Petelle (Societe Generale) provide TMI's Eleanor Hill with a whistlestop run...

22:24

Lift Off for Fed Rate Rises

Welcome to the latest edition of Liquidity Link Live, your exclusive market analysis provided by Northern Trust Asset Management, one of the world’s largest cash managers. Tune in each month to discover the very latest insights on the UK, Eurozone and US markets. This edition was recorded on the 5th of...

04:58

Treasury in 2022 and Beyond

Industry experts Bob Stark (Kyriba) and Sebastian di Paola (PwC) join TMI's Editor, Eleanor Hill, to explore the very latest treasury trends - and to discuss how smart treasurers can get ahead of th...

43:21

How BearingPoint Harnessed Data-Driven Forecasting with CashAnalytics and SAP

Listen back to our recent forecasting masterclass, where Group Treasurer Eveline Stam, and Conor Deegan (CashAnalytics) provided TMI's Eleanor Hill with a comprehensive overview of how consultancy firm BearingPoint achieved company-wide cash forecasting nirvana by combining specialist solutions from...

37:14

The 3 T’s of The Future: Tech, Treasury, and Transformation

Over the past two years, an increasingly dynamic environment has not only accelerated technology development – from quantum computing to blockchain technology, and even the metaverse – but also technology adoption, bridging colleagues and breaking down silos in a remote work world. In this podcast,...

44:02

Monetary Policy Continues to Drive Markets as Ukraine Invasion Weighs on March Meetings

Welcome to the second edition of Liquidity Link Live, your exclusive market analysis provided by Northern Trust Asset Management, one of the world’s largest cash managers. Tune in each month to discover the very latest insights on the UK, Eurozone and US markets. This edition was recorded on the 3rd of...

05:25