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Transcript of European Banking Barometer
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European Banking Barometer 2H13A brighter outlook?
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Contents
Page
1 Introduction 3
2 European overview 6
3 Economic environment 8
4 European sovereign debt crisis 11
us ness ou oo an ocus areas
6 Business priorities and product line expectations 30
7 Headcount 448 Contacts 50
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Introduction
As part of EYs commitment to building a better working world, we have developed the European Banking Barometer to
provide our clients with insight into the macro-economic outlook and its impact on the European banking industry over the
next six months.
Now in its fourth edition, the latest bi-annual study consists of 184 interviews with senior bankers across 11 markets:
Austria, Belgium, France, Germany, Italy, the Netherlands, the Nordics, Poland, Spain, Switzerland and the UK.
The fieldwork was conducted via an online questionnaire and telephone interviews between September and October
.
market.
A range of bank types were interviewed in each market to ensure the study is a fair reflection of each countrys banking
industry. Interviews were not conducted with subsidiaries of member/group banks.
e resu s n s repor are presen e n an aggrega e mar e orma an s own n percen ages. ease no e, some
charts may not add up to 100% as percentages have been rounded to the nearest whole number. Where possible, we
have compared and contrasted the data against the European Banking Barometer 1H13.
We would like to thank all the research participants for their contribution to the study.
If you would like to take part in our next European Banking Barometer study, please speak to your usual EY contactor refer to your local-country contact on page 50.
European Banking Barometer 2H13Page 3
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Composition of the survey sample by bank type
Bank type*
3434 Universal (large-scale banking group/major bank)
Corporate and investment
Private bank/Wealth management
Specialist (e.g., consumer credit, savings, or a bank that doesnt offer a current account)
Retail and business (SME business banking)
11
10
10
* Numbers in the pie chart reflect the percentage of respondents who answered.
Please note that given the structure of the German and Swiss banking markets, respondents in these two countries were provided with country-specific bank types that have been reallocated to our five European bank types as follows:
For Germany, big banks and regional banks were reallocated to universal banks; foreign banks (not head-quartered in Germany) were reallocated to corporate and investment banks; private bankers were reallocated to private banks/wealth
European Banking Barometer 2H13Page 4
managemen; savngs an s an coopera ve an s were rea oca e o re a an usness an s; an cen ra u ng soce es, u ng oan assoca ons an mor gage an s were rea oca e o speca s an s.
For Switzerland, major banks were reallocated to universal banks; investment banks were reallocated to corporate and investment banks; private bankers (general or limited partnership) and banks under foreign control were reallocated to
private banks/wealth management; cantonal banks, and regional and savings banks were reallocated to retail and business banks; and securities traders were reallocated to specialist banks.
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Composition of the survey sample by bank type
Corporate and
Private bank/
Wealth
Retail and
business
Retail and
business
Retail and
business
(privately
Type of bank
ar e o a n versa nves men managemen pec a s coopera ve s a e owne owne
Austria 10 9 0 0 1 0 0 0
Belgium 16 4 0 4 1 0 1 6
France 21 7 2 2 1 1 2 6
German 41 9 3 2 2 8 15 2
Italy 18 6 3 0 2 5 0 2
Netherlands 10 2 1 1 4 0 0 2
Nordics 14 8 1 0 4 0 0 1
Poland 8 6 0 0 0 0 0 2
Spain 13 5 1 1 2 1 0 3
Switzerland 10 2 0 4 0 0 3 1
UK 23 4 10 5 2 0 1 1
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Economic environment
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Uncertainty has given way to optimism, with most banks nowexpecting the economic outlook to improve
How do you expect the general economic outlook in your market to change over the next six months?*
2H13
1 8 35 53 3
4 20 50 23 2
1H13
Worsen significantly Worsen slightly Stay the same Improve slightly Improve significantly
Comments: For the first time since the launch of EYs European Banking Barometer, a majority of banks expect the economicoutlook to strengthen. This optimism reflects improving economic indicators that suggest after a protracted downturn the
recovery is taking hold across Europe. Eurozone GDP grew 0.3% in the second quarter of 2013 after a record 18 month
contraction. Furthermore, strong Purchasing Manager Index data for a number of European countries points to growth
becoming embedded. Nevertheless, as illustrated by the ECBs recent rate cut, the recovery remains weak and Eurozone GDP
is only expected to reach pre-crisis levels in 2014 or 2015, over six years after the start of the crisis.
European Banking Barometer 2H13Page 9
* Numbers reflect the percentage of respondents who answered. Base excludes respondents who answered "Don't know".
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Polish, Spanish and UK banks expect the greatest economicimprovement
2H13
How do you expect the general economic outlook in your market to change over the next six months?*
1H13
1 8
20
35
38
40
53
63
40
3Europe
Belgium
Austria
4 20
21
38
50
71
38
23
7
25
2Europe
Belgium
Austria
Net
increase
-13
-14
1
Net
increase
20
63
47
5
14
20
6
5
29
29
40
50
37
33
36
40
44
59
33
21Nordics
Netherlands
Italy
Germany
France
17
16
14
40
25
19
40
64
30
50
54
24
21
20
8
27
12
10
8
Nordics
Netherlands
Italy
Germany
France -36
8
-34
-10
7
-1
54
38
20
43
26
50
23
14
65
50
69
86
9
8
UK
Switzerland
Spain
Poland
'
3
3
3
8
11
10
16
15
64
55
41
46
19
31
34
31
3
6
UK
Switzerland
Spain
Poland 8
21
18
8
86
77
50
74
European Banking Barometer 2H13Page 10
* Numbers reflect the percentage of respondents who answered. Base excludes respondents who answered "Don't know".
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European sovereign debt crisis
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Concerns about the exposure of the banking sector tosovereign debt are beginning to recede
What level of impact do you think the Eurozone sovereign debt crisis will have on the banking sector in your
market over the next six months compared with the previous six months?*
4 31 48 15 1
2H13
1 19 46 27 8
1H13
Significantly decreased impact Slightly decreased impact About the same Slightly increased impact Significantly increased impact
Comments: More than twice as many banks expect the impact of the Eurozone sovereign debt crisis on their banking sector to
diminish over the next six months than expect it to increase. This is a remarkable reversal of the results in the previous edition
of the Barometer, and is underpinned by a return to growth in the Eurozone and signs that countries at the heart of the crisis are
regaining competitiveness; Spanish and Greek labor costs are in steady decline, while the Spanish and Italian Governments are
now running current account surpluses.
European Banking Barometer 2H13Page 12
* Numbers reflect the percentage of respondents who answered.
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with all countries except Austria, France and Polandexpecting the impact of the sovereign debt crisis to diminish
What level of impact do you think the Eurozone sovereign debt crisis will have on the banking sector in your
market over the next six months compared with the previous six months?*
6 38
20
50
60
6
20
Belgium
Austria
2H13
29
13
36
63
36
13 13
Belgium
Austria
1H13Net
increase
13
7
Net
increase
0
-38
2
5
30
33
29
19
50
39
44
52
28
24
24
20Netherlands
Italy
Germany
France
8
4
40
8
19
24
30
42
54
36
30
42
22
24
5
12
Netherlands
Italy
Germany
France 8
8
26
-10
-
0
-7
-5
-10
9
15
35
30
46
56
50
23
100
20
15
UK
Switzerland
Spain
Poland
3
19
10
9
23
44
45
41
38
31
34
34
15
6
7
16
23
UK
Switzerland
Spain
Poland
-
15
41
28
18
-
0
-46
-10
-44
Significantly decreased impact Slightly decreased impact About the same Slightly increased impact Significantly increased impact
European Banking Barometer 2H13Page 13
* Numbers reflect the percentage of respondents who answered.
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Business outlook and focus areas
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European banks are more optimistic about their ownperformance than at any time in the last 18 months
How do you expect your banks overall performance to change over the next six months?*
2H13
1 11 28 51 9
2 14 31 46 8
1H13
Weaken significantly Weaken slightly Stay the same Strengthen slightly Strengthen significantly
Comments: The de ree to which res ondents ex ect their banks erformance to stren then reflects both the im rovin
economic outlook and a generally healthier banking sector. Despite lingering concerns about the Eurozone sovereign debt crisisand the US debt ceiling, the macro-economic outlook is more stable. Additionally, most banks have made progress improving
the quality of their balance sheet. Regulation and the drive to reduce leverage have led banks to dispose of, or reduce exposure
to, non-core assets and businesses, and many institutions are beginning to look for opportunities to grow revenues. Dutchbanks have the most improved outlook, while only German banks are more pessimistic about their performance than in 1H13.
This pessimism may, in part, be driven by capital regulation. Historically German banks have held a higher level of hybrid capital
than their European counterparts, but this will no longer be possible under Basel III.
European Banking Barometer 2H13Page 15
* Numbers reflect the percentage of respondents who answered. Base excludes respondents who answered "Don't know".
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Only German respondents expect their banks overallperformance to deteriorate
How do you expect your banks overall performance to change over the next six months?*
Europe
Belgium
Austria 1H13
2H13
3.503.38
3.36 3.63
3.43 3.56
Italy
Germany
France..
3.15
3.613.25
2.90 3.80
2.93
Spain
Poland
Nordics3.93 4.07
2.92 3.25
3.813.54
1 2 3 4 5
UK
Switzerland
Weaken
significantly
Strengthen
significantly
. .
3.89 3.91
Stay the same
European Banking Barometer 2H13Page 16
* Numbers reflect the mean scores of respondents who answered on a scale of 1 to 5 where 1 denotes Weaken significantly and 5 denotes Strengthen significantly.
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With the Asset Quality Review looming, one-third of banksexpect to increase loan loss provisions
Over the next six months, what do you expect your banks total provisions against loan losses to do?*
2H13
1 12 54 26 8
3 12 53 28 4
1H13
Decrease significantly Decrease slightly Stay the same Increase slightly Increase significantly
Comments: Despite improving economic indicators, many European banks expect to increase loan loss provisions (LLPs) inthe next six months. This is unsurprising; the ECBs Asset Quality Review (AQR) which will stress test bank balance sheets
will be based on 2013 year-end data. As a result Eurozone banks are likely to increase provisions for potentially troublesome
loans in Q4. While Spanish and Italian banks expect the greatest increase in LLPs, UK banks, which are not subject to the AQR,generally expect LLPs to decrease.
European Banking Barometer 2H13Page 17
* Numbers reflect the percentage of respondents who answered. Base excludes respondents who answered "Don't know".
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Spanish and Italian banks are most likely to increase theirloan loss provisions in the next six months
Over the next six months, what do you expect your banks total provisions against loan losses to do?*
Europe
Belgium
Austria3.503.25
3.14 3.25
3.19 3.27
3.333.24
1H13
2H13
Netherlands
Italy
Germany
France
3.14
3.613.33
2.90 3.50
Spain
Poland
Nordics2.71 3.00
3.313.00
3.63 3.77
3.10
1 2 3 4 5
UK
Switzerland3.112.87
Decrease
significantly
Increase
significantlyStay the same
European Banking Barometer 2H13Page 18
* Numbers reflect the mean scores of respondents who answered on a scale of 1 to 5 where 1 denotes Decrease significantly and 5 denotes Increase significantly.
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Lending prospects will improve for most sectors
How do you expect the corporate lending policies of banks in your market to change in each of the following
sectors over the next six months?*
2H131H13
11
20
40
50
16
21
35
33
Healthcare
SMEs
Net less
restrictive
Net less
restrictive
12
19
30
29
20
11
12
19
11
26
27
27
28
34
25
19
22
21
21
24
25
21
25
28
Retail and consumer products**
Information technology
Commercial and professional services**
Media and telecommunications
Manufacturing and industrials (incl. chemicals, eng.)**
nergy, mn ng an m neras -15
7
4
-1
6-1
14
23
9
15
166
29
26
30
37
17
17
19
23
More restrictive Less restrictive
38
37
49
51
16
10
18
16
Transport (incl. automotive and shipping)**
Financial services
Construction
Commercial real estate -35
-31
-27
-22
-14
-11
-9
-12
Comments: Since our previous Barometer, and despite one third of banks expecting to increase loan loss provisions, the outlook forlending has improved across most sectors. However, lending to a few sectors, including construction and commercial real estate will
continue to tighten. The small and medium sized enterprise (SME) sector is expected to see the greatest loosening of lending policies.SMEs are benefitting from both the improving economic environment and the efforts of national governments and the European
Investment Bank (EIB) to boost lending to the sector. The UK, which is not subject to the Asset Quality Review and is the second most
optimistic country about economic growth, is the only market where lending is expected to be less restrictive for all sectors.
European Banking Barometer 2H13Page 19
* Numbers reflect the percentage of respondents who answered. Respondents answering Stay the same are not displayed. Base excludes respondents who answered "Don't know".
** Energy and mining includes minerals, Manufacturing includes industries, chemicals and engineering, Commercial services includes professional services, Retail includes consumer products and Transport includes automotive and shipping.
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although lending policies for construction and commercialreal estate will continue to be restricted in all countries
How do you expect the corporate lending policies of banks in your market to change in each of the following
sectors over the next six months?*
29
7
13
21
50
12
41
40
27
21
21
41
Austria Belgium France
29
14
43
14
29
29
43
71
29
43
43
28
SMEs
HealthcareEnergy and mining**
Manufacturing**
Media and telecomms
Commercial services** 33
22
50
33
11
30
22
33
10
11
22
20
43
60
40
29
53
33
7
13
20
12
Germany Italy Netherlands
14
14
57
57
71
71
43
29
29
14
14
14
Information technology
Retail**
Commercial real estate
Construction
Financial services
Transport** 30
22
13
22
11
10
40
33
13
22
11
10
12
13
36
4
18
13
12
66
38
36
41
21
26
20
SMEs
Healthcare
Energy and mining**
Manufacturing**
Media and telecomms
Commercial services**
Information technology
**
25
17
8
23
15
27
8
67
50
50
38
38
27
25
25
67
33
50
33
33
33
33
24
15
35
18
29
22
11
18
Commercial real estateConstruction
Financial services
Transport**
53
54
14
38
23
23
21
31
50
66
67
25
33
50
33
More restrictive Less restrictive
European Banking Barometer 2H13Page 20
* Numbers reflect the percentage of respondents who answered. Respondents answering Stay the same are not displayed. Base excludes respondents who answered "Don't know".
** Energy and mining includes minerals, Manufacturing includes industries, chemicals and engineering, Commercial services includes professional services, Retail includes consumer products and Transport includes automotive and shipping.
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except the UK, where banks expect to loosen lendingrestrictions across all sectors
How do you expect the corporate lending policies of banks in your market to change in each of the following
sectors over the next six months?*
Nordics Poland Spain
20
1030
10
10
10
60
5020
40
30
50
1720
20
20
67
40
20
25
38
13
26
14
25
5076
38
38
14
SMEs
HealthcareEnergy and mining**
Manufacturing**
Media and telecomms
Commercial services**
Switzerland UK
20
10
80
80
30
20
40
50
10
30
17
14
40
50
33
29
29
25
13
13
43
25
13
25
25
14
Information technology
Retail**
Commercial real estate
Construction
Financial services
Transport**
20
10
10
10
10
30
30
30
30
30
SMEs
Healthcare
Energy and mining**
Manufacturing**
Media and telecomms
Commercial services**
Information technology
**
8
8
8
8
8
46
46
38
39
46
31
39
39
30
20
20
10
Commercial real estateConstruction
Financial services
Transport**
88
20
8
5330
40
39
More restrictive Less restrictive
European Banking Barometer 2H13Page 21
* Numbers reflect the percentage of respondents who answered. Respondents answering Stay the same are not displayed. Base excludes respondents who answered "Don't know".
** Energy and mining includes minerals, Manufacturing includes industries, chemicals and engineering, Commercial services includes professional services, Retail includes consumer products and Transport includes automotive and shipping.
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European banks are beginning to shift their focus frombalance sheet stabilization to growing new revenues
Introducing/Increasing incentives to increase customer deposits
How likely are the banks in your market to be engaged in the following activities over the next six months?*
3.543.39
1H13
Repaying central bank funding programs
Launching initiatives to promote growth
Seeking funding from wholesale capital markets
3.28 3.49
3.31 3.48
3.363.18
3.00 3.31
2H13
Reducing the balance sheet
Selling assets outside home markets
Selling assets outside Europe
3.29 3.42
3.14 3.27
3.06 3.22
3.353.20
1 2 3 4 5
Reducing loan to deposit ratios
Accessing central bank funding programs
..
2.852.69
Significantly
less
Significantly
moreStay the same
Comments:A more stable economic environment and continued low funding rates have helped banks to strengthen theirbalance sheets and reduce their dependence on central bank funding programs. Average ECB funding for Eurozone banks is
now just 2.5% of bank assets and with potential penalties for excessive LTRO usage in the AQR, 51% are planning to repaycentral bank funding in the next six months. Many banks also expect to sell assets outside their core markets to boost capital
and liquidity. With healthier balance sheets banks are beginning to focus on revenue growth. Fifty percent of banks anticipate
launching specific initiatives to promote growth in the next six months and 45% expect to increase lending to customers. Forty-
four ercent of banks ex ect to increase fundin from wholesale markets to su ort this rowth.
European Banking Barometer 2H13Page 22
* Numbers reflect the mean scores of respondents who answered on a scale of 1 to 5 where 1 denotes Significantly less and 5 denotes Significantly more.
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Most banks in all countries, except France, anticipatereducing access to central bank funding programs
Austria Belgium France
How likely are the banks in your market to be engaged in the following activities over the next six months?*
30
20
10
20
10
10
10
50
50
30
40
50
40
10
20
10
10
10
10
Seeking funding from wholesale capital markets
Repaying central bank funding programs
Launching initiatives to promote growth
Reducing loan to deposit ratios
Introducing/Increasing incentives to increase customer deposits
Reducing the balance sheet
38
44
63
19
50
25
19
25
13
13
25
13
25
19
13
6
10
10
19
5
5
48
62
24
48
62
48
5
5
5
19
5
Germany Italy Netherlands
50
30
10
10
10
10
40
60
10
10
Accessing central bank funding programs
Lending to customers
Selling assets outside Europe
Selling assets outside home market
6
38
38
25
6
6
6
6
50
19
19
13
13
13
6
24
24
5
24
19
29
53
5
5
10
10
10
1010
50
70
40
40
10
20
30
10
10
10
6
11
6
6
6
11
6
28
39
61
33
50
33
11
6
11
11
15
30
37
37
38
5
3
8
29
10
10
15
15
3
2
2
5
Seeking funding from wholesale capital markets
Repaying central bank funding programs
Launching initiatives to promote growth
Reducing loan to deposit ratios
Introducing/Increasing incentives to increase customer deposits
e uc n g t e a a nce s eet
40
40
20
20
10
10
30
30 10
39
22
66
17
56
44 11
20
50
18
5
3
25
8
10
3
10
Accessing central bank funding programs
Lending to customers
Selling assets outside Europe
e ng asse s ou s e ome mar e
Significantly moreSlightly moreSignificantly less Slightly less
European Banking Barometer 2H13Page 23
* Numbers reflect the percentage of respondents who answered. Respondents answering About the same are not displayed.
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A majority of banks in all countries also expect to increaseinitiatives to promote growth
Nordics Poland Spain
How likely are the banks in your market to be engaged in the following activities over the next six months?*
8
31
1515
62
54
69
62
54
38
15
15
23
8
25
63
63
63
25
25 13
21
7
21
29
7
7
7
14
36
36
21
36
36
7
7
7
Seeking funding from wholesale capital markets
Repaying central bank funding programs
Launching initiatives to promote growth
Reducing loan to deposit ratios
Introducing/Increasing incentives to increase customer deposits
Reducing the balance sheet
Switzerland UK
23
15
8
8 15
46
54
62
15
8
8
8
13
13
13
13
88
36
21
14
14
43
7
7
57
14
21
Accessing central bank funding programs
Lending to customers
Selling assets outside Europe
Selling assets outside home market
13
13
9
26
4
26
4 39
39
52
22
39
35
9
9
9
4
13
9
20
10
10
40
30
40
40
60
20
10
Seeking funding from wholesale capital markets
Repaying central bank funding programs
Launching initiatives to promote growth
Reducing loan to deposit ratios
Introducing/Increasing incentives to increase customer deposits
Reducing the balance sheet
39
4
9
9
9
4
4
9
52
43
48
4
4
50
20
10
10
10 10
10
30
70
10
20
10
Accessing central bank funding programs
Lending to customers
Selling assets outside Europe
Selling assets outside home market
Significantly moreSlightly moreSignificantly less Slightly less
European Banking Barometer 2H13Page 24
* Numbers reflect the percentage of respondents who answered. Respondents answering About the same are not displayed.
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Banks will continue to adjust their footprints
Which, if any, of the following is your bank likely to consider over the next six months in relation to the countries
in which it operates?*
32
4144
25
19
27 27
23
Sell assets Buy assets Partnerships orjoint ventures
None of these
1H13 2H13
Comments: Since the crisis, many banks have sold assets as they have restructured their businesses to reduce complexity or
raise capital. This reshaping of the banking sector is set to continue, with 56% of the respondents expecting to either buy or sell
assets, or enter a joint venture in the next six months. Banks remain focused on getting their European footprint right and 91%
of banks anticipating asset purchases and 86% of banks anticipating asset sales or joint ventures, expect these to occur within
the European market.
European Banking Barometer 2H13Page 25
* Numbers reflect the percentage of respondents who answered. Respondents could select more than one option.
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with the majority of sales, acquisitions and joint venturesexpected in European markets
In which regions is your bank likely to sell assets / buy assets / consider joint ventures in over the next six
months?*Europe
5
4
Sell assets
Buy assets
North America
7
5
Sell assets
Buy assets
Asia Pacific
31
36
41
Joint ventures
Sell assets
Buy assets
1
0 5 10
Joint ventures
5
0 5 10
Joint ventures0 10 20 30 40 50
South America 2Buy assets
Middle East
Across the world
2
1
2
Joint ventures
Sell assets
Buy assets
1
2
0 1 2 3 4
Joint ventures
Sell assets
0
4
5
Joint ventures
Sell assets
Buy assets
0 5 10 0 5 10
European Banking Barometer 2H13Page 26
* Numbers represent the total number of mentions for that particular region. Respondents could state more than one region.
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Swiss banks are now significantly more likely to sell assets,while French banks are significantly more likely to buy assets
Which, if any, of the following is your bank likely to consider over the next six months in relation to the countries
in which it operates?*
Sell assets Buy assets Partnerships or joint ventures None of these
21
25
27
31
40
Euro e
Belgium
Austria
21
0
27
38
10
7
0
23
13
10
50
75
44
38
50
50
29
36
39
17
43
Italy
Germany
France
0
20
20
25
11
15
57
42
7
36
19
28
15
24
17
61
28
41
50
63
19
53
15
43
30
38
0
0
Spain
Poland
Nordics
e er an s
31
38
29
20
15
13
21
16
8
36
20
46
25
14
16
54
43
50
23
63
71
31
17
35
40
UK
Switzerland
42
24
43
30
2H13 1H13
25
28
30
20
28
41
22
40
European Banking Barometer 2H13Page 27
* Numbers reflect the percentage of respondents who answered. Respondents could select more than one option.
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Most banks anticipate consolidation within the industry inboth the short and medium term.
To what extent do you anticipate consolidation of the banking industry over the next 12 months and within
the next three years?*
Within three years12 months
6
27
12
14
43
31
I do not anticipate any consolidation Small-scale consolidation Medium-scale consolidation Large-scale consolidation
41
Comments:Although 73% of banks anticipate some consolidation in the industry over the next 12 months, most expect this willbe small scale. Despite the significant strides banks have made in strengthening their balance sheets, the economic recovery is
not yet assured and institutions remain cautious about major acquisitions in the short term. However, over the next three years
55% of the respondents expect medium- or large-scale consolidation. Switzerland is most likely to see consolidation in both the
short and medium term, with all the respondents anticipating some consolidation, and 90% expecting medium- or large-scale
consolidation. Swiss private banks have been struggling with declining profitability due to increased compliance and IT costs,
as well as revenue pressure following recent bilateral tax agreements with Germany and the UK.
European Banking Barometer 2H13Page 28
* Numbers reflect the percentage of respondents who answered.
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Swiss banks anticipate the greatest degree of consolidation
To what extent do you anticipate consolidation of the banking industry in your market over the next 12 months
and within the next three years?*
Austria Belgium Europe
10
20
40
70
40
10
10
3 years
12 months
6
56
44
25
38
13
13
6
14
27
31
41
43
26
12
6
France
10
10
14
57
62
29
14
5
Germany Netherlands Nordics
50
70
30
20
20
10 31
50
31
43
31 8
7
Italy
6
22
22
50
67
28
632
17
32
51
32
27
4
5
3 years
12 months
23 31 46
SwitzerlandPoland UKSpain
13 13 7512 months 48 48 410 40 50
42 17 42
I do not anticipate any consolidation Small-scale consolidation Medium-scale consolidation Large-scale consolidation
25 63 133 years 30 35 3510 40 50
European Banking Barometer 2H13Page 29
* Numbers reflect the percentage of respondents who answered.
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Business priorities and product lineex ectations
European Banking Barometer 2H13Page 30
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Regulatory compliance and risk management remain themost important agenda items for European banks
73Preparing for Basel III/CRD IV
Rank the importance of the following agenda items for your organization*
1H13
3
2H13
1
Rank order of importance
46
4849
60
45
49
55
41Investin in customer-facin technolo
Cutting costs
Reputational risk
Compliance with capital market regulationsCompliance with consumer regulation/remediation
Minimizing non-essential expenditure
Streamlining processes
Risk management 1
2
4
67
-
5
2
3
4
56
7
8
23
23
27
37
26
18
25
-
Establishing new business segments
New remuneration systems
Restructuring the business to comply with regulations
Developing/Introducing new products
Restructuring the business to cut costs
Developing Recovery and Resolution Plans
Current changes in financial reporting/IFRS
11
12
9
10
14
18
13
10
11
12
13
14
15
16
8
12
12
14
14
15
Reducing the number of products
Off-shoring
Outsourcing
Disposing of assets or businesses
New foreign markets/Internationalization
Acquiring new assets or businesses
Innovation and growth
Cost cutting and efficiency
Risk and regulation
19
16
17
20
22
21
18
19
20
21
22
23
*
Comments: Despite signs that banks are beginning to look for ways to grow revenues, risk, regulation and efficiency remain the
top agenda items for European banks. Perhaps not surprisingly, given the greater clarity now that CRD IV has been agreed,
preparing for Basel III is now the most important agenda item for banks it was ranked third in our previous Barometer. More
notably, tactical cost cutting has fallen out of the top five priorities for banks, to be replaced by compliance with consumer
regulation and remediation. This is now a key agenda item for banks in countries that have faced mis-selling scandals, including
the UK and Spain, with regulators placing an increased emphasis on consumer protection.
European Banking Barometer 2H13Page 31
espon ens were as e o ran e mporance o ac v es on a scae o o , w ere eno es o a a mporan an eno es very mporan . um ers s ow e percenage o respon ens se ec ng e er , or . ase
excludes respondents answering Does not apply.
Reputational risk includes tax transparency. Compliance with capital markets regulations i.e., MiFID II/EMIR. Investing in new customer-facing technology e.g., mobile solutions.
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Banks anticipate an improved outlook for all business lines
How do you rate the outlook for your bank over the next six months in each of the following business lines?*
2H131H13
10
7
6
1
3
1
45
45
46
6
8
14
Corporate banking
Retail banking
Private banking and wealth management
32
36
35
11
11
11
13
10
13
2
4
3
Corporate banking
Retail banking
Private banking and wealth management
Net
increase
30
33
28
Net
increase
53
43
40
20
9
10
12
1
1
1
1
32
36
38
43
9
5
10
8
Transaction advisory (e.g., M&A)
Securities services
Asset management
Deposit business
22
34
37
41
4
4
13
11
16
16
18
14
5
2
3
2
Transaction advisor e. . M&A
Securities services
Asset management
Deposit business 36
29
20
5
38
37
31
20
14
14
1
3
30
32
5
7
Securities trading
Debt and equity issuance
26
28
4
9
21
14
4
8
Securities trading
Debt and equity issuance 15
5
22
20
Very goodFairly goodVery poor Fairly poor
Comments: Banks are most optimistic about the outlook for private banking and wealth management, which is particularly attractivegiven its capital-lite business model. With global markets having rebounded since 2009, the wealth of high and ultra high net worth
individuals has seen a dramatic recovery - the wealth of EU27 billionaires has almost doubled since then and grew around 23% in the
last year alone. However, this optimism may be more due to hope than expectation. With banks competing over a relatively small
customer pool not everyone can be a winner. Banks also expect an improved outlook for retail and corporate banking. With signs of
an economic recovery in Europe, banks are hopeful that both businesses and individuals will look to borrow and invest. Only the
Dutch banks do not ex ect an im roved outlook for retail and cor orate bankin .
European Banking Barometer 2H13Page 34
* Numbers reflect the percentage of respondents who answered. Respondents answering Neither good, nor poor are not displayed.
.
ith th t t f t d i t il b ki
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with the strongest performance expected in retail banking,wealth management
How do you rate the outlook for your bank over the next six months in each of the following business lines?*
Retail bankingPrivate banking and Wealth management
14
13
5
7
8
29
3
11
14
53
51
35
45
42
33
7
5
6
8
17
Netherlands
Italy
Germany
France
Europe
Belgium
Austria
29
50
48
47
46
42
13
29
7
8
5
14
42
25
14
3
5
6
13
14
1
Netherlands
Italy
Germany
France
Europe
Belgium
Austria
6
22
13
13
6
8
47
22
50
50
63
12
11
17
13
13
UK
Switzerland
Spain
Poland
Nordics
60
60
45
50
38
10
10
18
17
25
5
30
17
13
5UK
Switzerland
Spain
Poland
Nordics
Deposit businessCorporate banking
53
33
45
43
43
67
10
10
8
14
67
13
15
15
12
7
1
11
Netherlands
Italy
Germany
France
Europe
Belgium
Austria
36
39
38
45
27
40
17
6
27
10
17
14
12
14
10
18
10
2
1
Netherlands
Italy
Germany
France
Europe
Belgium
Austria
44
33
45
63
60
17
18
6
13
10
UK
Switzerland
Spain
Poland
Nordics
Very goodFairly goodVery poor Fairly poor
52
44
64
100
73
10
11
9
5
9
5UK
Switzerland
Spain
Poland
Nordics
European Banking Barometer 2H13Page 35
* Numbers reflect the percentage of respondents who answered. Respondents answering Neither good, nor poor are not displayed.
d t t Th tl k h l i d f
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and asset management. The outlook has also improved forcorporate and investment banking
How do you rate the outlook for your bank over the next six months in each of the following business lines?*
Securities servicesAsset management
80
53
33
30
36
25
38
5
25
13
7
18
15
9
20
1
Netherlands
Italy
Germany
France
Europe
Belgium
Austria
29
38
23
33
38
54
10
29
13
5
10
31
10
29
10
14
10
20
14
1
Netherlands
Italy
Germany
France
Europe
Belgium
Austria
47
20
45
25
25
13
10
25
10
25
UK
Switzerland
Spain
Poland
Nordics
Debt and equity issuance
56
44
58
67
42
11
17
33
8
22
25
6UK
Switzerland
Spain
Poland
Nordics
Transaction advisory
25
22
29
20
22
43
1
25
54
22
29
32
33
25
15
3
6
9
11
14
Netherlands
Italy
Germany
France
Europe
Belgium
Austria
14
19
20
13
14
11
25
9
3
57
31
14
38
32
56
25
14
13
7
13
Netherlands
Italy
Germany
France
Europe
Belgium
Austria
13
20
30
11
10
31
50
30
50
44
13
10
25
11
UK
Switzerland
Spain
Poland
Nordics
22
8
14
11
53
11
25
57
33
6
11
33
UK
Switzerland
Spain
Poland
Nordics
Very goodFairly goodVery poor Fairly poor
European Banking Barometer 2H13Page 36
* Numbers reflect the percentage of respondents who answered. Respondents answering Neither good, nor poor are not displayed.
i di ti h th t th i b
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indicating a hope that, as the economic recovery becomesembedded, businesses will be more willing to invest
How do you rate the outlook for your bank over the next six months in each of the following business lines?*
Securities trading
50
38
26
18
30
25
25
17
12
5
13
13
13
29
14
13
25
17
1
Netherlands
Italy
Germany
France
Europe
Belgium
Austria
Very goodFairly goodVery poor Fairly poor
28
10
50
43
36
11
10
14
17
10
14
9
UK
Switzerland
Spain
Poland
Nordics
European Banking Barometer 2H13Page 37
* Numbers reflect the percentage of respondents who answered. Respondents answering Neither good, nor poor are not displayed.
Customer demand for investments and lending is expected to
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Customer demand for investments and lending is expected toovertake demand for deposits and savings
How do you expect customer demand for retail products at your bank to change over the next six months?*
2H131H13
71 50 8Personal investment products37 7143Personal investment products
Net
increase
27
Net
increase
50
12
9
1
1
46
46
5
5
Personal savings and deposits
Personal loans
44
32
6
3
16
19
1
5
Personal savings and deposits
Personal loans
11
33
41
38
61 36 1Credit cards28 4102Credit cards 20 30
Increase significantlyIncrease slightlyDecrease significantly Decrease slightly
,
investment products. Banks expect savers will move their savings out of cash in an attempt to generate greater returns in anegative real interest rate environment. Banks also anticipate increased demand for both secured and unsecured lending. A
significant majority of banks in all countries except Austria expect increased demand for personal loans. Ultra-low interest rates
have enabled retail customers to pay down debt and improve their personal balance sheets. With indications of an improvingeconomy, banks believe that these customers will now be more willing to borrow for consumption. Views on real-estate lending
are more polarized, suggesting that the recovery of the European housing market is far from assured. Only in the UK, where the
European Banking Barometer 2H13Page 38
* Numbers reflect the percentage of respondents who answered. Respondents answering Stay the same are not displayed. Base excludes respondents answering Not applicable.
, .
Banks expect demand for deposits and savings products to
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Banks expect demand for deposits and savings products toremain high, but increased demand for a range of credit
How do you expect customer demand for retail products at your bank to change over the next six months?*
Personal real estate loansPersonal investment products
21
8
7
13
1
67
57
53
37
50
64
50
17
3
5
8
29
Netherlands
Italy
GermanyFrance
Europe
Belgium
Austria
60
46
55
56
50
31
50
5
5
15
40
8
3
17
14
23
25
3
6
2
Netherlands
Italy
Germany
France
Europe
Belgium
Austria
11
9
13
11
22
33
45
75
50
11
18
13
13
UK
Switzerland
Spain
Poland
Nordics
Personal savings and deposit products
40
44
55
75
29
30
22
27
43
13
UK
Switzerland
Spain
Poland
Nordics
Personal loans
33
57
29
72
46
40
38
17
5
5
7
17
36
21
12
13
13
6
1
13
Netherlands
Italy
Germany
France
Europe
Belgium
Austria
50
46
38
56
46
57
38
17
11
5
14
13
17
15
5
6
9
7
38
3
6
1
Netherlands
Italy
Germany
France
Europe
Belgium
Austria
60
33
55
50
63
27
13
UK
Switzerland
Spain
Poland
Nordics
70
11
45
75
25
9
11
9
13
UK
Switzerland
Spain
Poland
Nordics
Increase significantlyIncrease slightlyDecrease significantly Decrease slightly
European Banking Barometer 2H13Page 39
* Numbers reflect the percentage of respondents who answered. Respondents answering Stay the same are not displayed. Base excludes respondents answering Not applicable.
suggests customers are now more willing to spend for
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suggests customers are now more willing to spend forpersonal consumption
How do you expect customer demand for retail products at your bank to change over the next six months?*
Credit cards
14
11
6
9
13
1
75
50
2639
36
36
38
6
1
Netherlands
Italy
GermanyFrance
Europe
Belgium
Austria
13
22
11
55
50
43
9
UK
Switzerland
Spain
Poland
or cs
Increase significantlyIncrease slightlyDecrease significantly Decrease slightly
European Banking Barometer 2H13Page 40
* Numbers reflect the percentage of respondents who answered. Respondents answering Stay the same are not displayed. Base excludes respondents answering Not applicable.
Banks anticipate strong growth in corporate lending and debt
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Banks anticipate strong growth in corporate lending and debtissuance as corporations look to increase capital expenditure
How do you expect demand for corporate products at your bank to change over the next six months?*
2H131H13Net
increase
28
Net
increase
54
10
6
2 37
52
5
8
Debt issuance
Corporate loans
41
39
6
5
14
14
5
2
Debt issuance
Corporate loans
2
12
23
1214
13
6
1
28
30
4
7
Hedging products
M&A advisory
29
24
5
2
18
15
4
9
Hedging products
M&A advisory
-10 8
Increase significantlyIncrease slightlyDecrease significantly
163 20 7Equity issuance/IPOs16 3209Equity issuance/IPOs
Decrease slightly
Comments: Improvement in the Composite European Purchasing Managers Index, which tracks projected spending andproduction levels, suggests that European corporations will increase their capital expenditure, driving demand for financing in
the coming months. The precise shape of demand for funding will vary across Europe. While most businesses remain
dependent on bank loans, respondents in some countries, such as the UK and the Nordics, expect the increase in demand for
debt and equity issuance to outstrip that for corporate lending. This suggests that there may be a structural shift towards a US
funding model, which places greater reliance on the financial markets.
European Banking Barometer 2H13Page 41
* Numbers reflect the percentage of respondents who answered. Respondents answering Stay the same are not displayed. Base excludes respondents answering Not applicable.
Corporate lending still dominates financing for European
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Corporate lending still dominates financing for Europeanbusinesses. However increased demand for debt
How do you expect demand for corporate products at your bank to change over the next six months?*
Corporate loans Debt issuance
50
57
21
36
37
43
33
7
5
11
24
10
29
3
2
Netherlands
Italy
Germany
France
Europe
Belgium
Austria
25
50
5559
52
88
44
512
8
13
7
6
6
33
Netherlands
Italy
GermanyFrance
Europe
Belgium
Austria
53
33
30
43
44
13
14
22
7
11
10
11
UK
Switzerland
Spain
Poland
Nordics
41
22
70
57
44
18
10
29
11
6
11
20
UK
Switzerland
Spain
Poland
Nordics
M&A advisory Hedging products
8
20
6
14
14
8
11
6
33
31
14
19
28
14
38
33
13
4
13
Netherlands
Italy
Germany
France
Europe
Belgium
Austria
33
8
43
30
67
50
3
14
7
14
50
22
14
13
14
3
1
Netherlands
Italy
Germany
France
Europe
Belgium
Austria
11
38
30
11
6
13
10
44
13
40
57
33
6
14
UK
Switzerland
Spain
Poland
Nordics
54
33
33
50
158
11
22
UK
Switzerland
Spain
Poland
or cs
Increase significantlyIncrease slightlyDecrease significantly Decrease slightly
European Banking Barometer 2H13Page 42
* Numbers reflect the percentage of respondents who answered. Respondents answering Stay the same are not displayed. Base excludes respondents answering Not applicable.
and equity financing in the UK Italy and the Nordics
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and equity financing in the UK, Italy and the Nordicssuggests a shift towards greater reliance on market funding
How do you expect demand for corporate products at your bank to change over the next six months?*
Equity issuance/IPOs
8
3214
16
13
17
8
3
3
31
614
20
13
17
8
14
7
13
Netherlands
Italy
GermanyFrance
Europe
Belgium
Austria
7
13
11
20
13
20
20
25
22
20
67
20
11
UK
Switzerland
Spain
Poland
Nordics
Increase significantlyIncrease slightlyDecrease significantly Decrease slightly
European Banking Barometer 2H13Page 43
* Numbers reflect the percentage of respondents who answered. Respondents answering Stay the same are not displayed. Base excludes respondents answering Not applicable.
Headcount
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Headcount
European Banking Barometer 2H13Page 44
Ongoing industry restructuring and a focus on efficiency will
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Ongoing industry restructuring and a focus on efficiency willlead to further job cuts across the sector
Over the next six months, how do you expect the headcount of your bank to change?*
2H13 23 23410
1H13 20 3329
Increase significantlyIncrease slightlyDecrease significantly Decrease slightly
Comments: European banks remain divided on headcount changes. Banks in countries such as Austria, Poland, Spain andSwitzerland, which are still going through significant restructuring, anticipate the greatest headcount reductions. In some
markets that are further along with their restructuring, such as the Netherlands, the Nordics and the UK, banks actually expect
to increase headcount. However, even in these countries the picture varies widely from bank to bank.
European Banking Barometer 2H13Page 45
* Numbers reflect the percentage of respondents who answered. Respondents answering Stay the same are not displayed. Base excludes respondents answering "Don't know".
but banks in the Netherlands, the Nordics and the UK now
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,anticipate overall headcount growth
Over the next six months, how do you expect the headcount of your bank to change?*
2H131H13
34
25
40
10
13
20
23
31
10
2
6
Europe
Belgium
Austria -50
-1
-1932
43
63
9
13
20
13
3Europe
Belgium
Austria
Net
increase
-63
-43
-18
Net
increase
21
30
44
24
7
10
6
12
43
40
28
12
10
2
Nordics
Netherlands
Italy
Germany
rance -
-22
-22
10
1557
20
58
24
7
20
8
8
7
30
17
17
7Nordics
Netherlands
Italy
Germany
rance -
-15
-49
-10
-50
26
50
31
4
23
35
20
15
4UK
Switzerland
Spain
-
-39
-30
931
14
28
14
3
9
25
28
31
6
9
UK
Switzerland
Spain
-
3
11
-14
Increase si nificantlIncrease sli htlDecrease si nificantl Decrease sli htl
European Banking Barometer 2H13Page 46
* Numbers reflect the percentage of respondents who answered. Respondents answering Stay the same are not displayed. Base excludes respondents answering "Don't know".
Headcount will remain stable in growth sectors such as
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gprivate banking and asset management
In which areas of the business do you expect headcount to increase or decrease?*
2H131H13
11
12
13
11
36
13
10
12
11
22
8
Asset management
Retail and business banking
Private banking and wealth management** 3
-10
10
Net
increase
Net
increase
0
-24
0
7
8
9
10
2
9
10
17
10
4
13
6
13
3
15
16
Other
Compliance, risk and finance
Corporate banking
Investment banking -10
-2
1
-3
-7
-1
-1
5
4
5
30
33
2
3
22
21
Other head office functions
Operations and IT
Decrease Increase
-18
-20
-28
-26
Comments: Redundancies will be focused on head office functions, including operations and IT, as banks continue to
streamline processes and improve efficiency. Headcount will be largely unchanged in growth businesses such as private
banking and asset management. However in retail banking, despite expectations of growth, headcount is still expected to fall
as banks rationalize branches following mergers and the focus on efficiency and automation of branch activity continues apace.
European Banking Barometer 2H13Page 47
* Numbers reflect the percentage of respondents who answered. Base excludes respondents answering that headcount would Stay the same.
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particularly in Poland and Spain
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In which areas of the business do you expect headcount to increase or decrease?*
Nordics Poland Spain
1020
30
10
20
1010
20
20
Corporate banking
Investment bankingAsset management
Retail and business banking
Private banking and wealth management
13
50
13
25
11
2211
67
11
11
11
11
30
20
10
10
Other head office functions
Operations and IT
Other
Compliance, risk and finance
63
50
78
22
11
25
6
31
19
31
13
6
13
14
43
29
29
14
29
Investment banking
Asset management
Retail and business banking
Private banking and wealth management
19
25
19
14
43
1414
Other head office functions
Operations and IT
OtherCompliance, risk and finance
European Banking Barometer 2H13Page 49
* Numbers reflect the percentage of respondents who answered. Base excludes respondents answering that headcount would Stay the same.
Contacts
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European Banking Barometer 2H13Page 50
Contacts
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For more information on how we can help, please contact our team.
EMEIA: France: Nordics: Switzerland:
Robert Cubbage
+44 20 7951 2319
Steven Lewis
+44 20 7951 9471
Luc Valverde
+33 1 46 93 63 04
Germany:
Lars Weigl
+46 8 520 590 45
Poland:
Philippe Zimmermann
+41 58 286 32 19
UK:
Austria:
Dirk Mller-Tronnier
+49 6196 996 27429
Italy:
Iwona Kozera
+48 22 557 7491
Spain:
Omar Ali
+44 20 7951 1789
+43 1 21170 1352
Belgium:
Jean-Fran ois Hubin
+39 02 7221 2306
Netherlands:
Wouter Smit
+34 91 572 7291
+32 2 774 9266
+31 88 407 1574
European Banking Barometer 2H13Page 51
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