European banking presentation 20.04.2012

EUROPEAN BANKING

Structural Features And The Consolidation Trend

Deregulation And The Regulatory Environment

Developments In Retailer Financial Services Private Banking Corporate And Investment Banking Technological Developments Affecting

European Banks Performance In European Banking

EUROPEAN BANKING

EUROPEAN BANKİNG

European banking markets have experienced market changes over the last decade or so- the number of banks has fallen substantially as a result of a merger and acquisitions (M&As) wave, and industry concentration has increased.

BRUNCHES IN EUROPE

M&AS IN EUROPE

STRUCTURAL FEATURES AND THE CONSOLİDATİON TREND

Market conditions have undergone extensive changes over recent years.

STRUCTURAL FEATURES AND THE CONSOLİDATİON TREND

In addition, progress in technology, especially phone-based and internet banking, has enabled financial firms to extend their activities beyond local or national boundaries and to increase their market share by providing competitive products to wider markets at a lower price.

NUMBER OF BANKS

Technological developments, deregulation at the EU level and the introduction of the single market for financial services, have all played their part in restructuring the features of European markets.

NUMBER OF BANKS

As Table 13.1 shows, a fall in the number of bankshas been a shared tendency throughout Europe.

NUMBER OF BANKS

Another indicator of the changing features of the banking sector relates to the distribution of bank branches

NUMBER OF BANKS

EMPLOYMENT İN THE BANKİNG SECTOR

Another factor that may be suggestive of the relative size of the banking sector is the amount of employment in the banking industry as a percentage of total employment.

M&AS ACTİVİTY AND THE CONSOLİDATİON TREND

Cross-border consolidation of financial institutions within Europe has been relatively limited, possibly reflecting efficiency barriers to operating across borders, including distance; differences in language, culture, currency, and

BANKİNG SECTOR CONCENTRATİON What’s banking sector concentration got to do with Private

Equity market?

Whether increased concentration in the banking sector should be welcomed or combated is far from clear. Many observers claim that a lowered competition may have positive impacts on both the solvency of individual banks.

BANKİNG SECTOR CONCENTRATİON

The current financial crisis has already proven that structural changes in the Banking sector are quickly carried over the private equity markets. In particular, banks are no longer as readily willing to supply debt for LBOs as it has been the case in the previous years.

BANKİNG SECTOR CONCENTRATİON

In principle there are two channels through which banking concentration could be transfered into the buyout market. Relationship lending is the first channel.

BANKİNG SECTOR CONCENTRATİON

The second channel for transferring banking sector changes into the buyout market is the way how LBO-debt is arranged. In general banks syndicate the LBO financing, that is, a consortium of usually large banks share the debt.

BANKİNG SECTOR CONCENTRATİON

We analyze empirically how the degree of concentration/competition in the Banking sector affects the structural achievements in the PE market..

We employ data from two sources. Market-level data are taken from the database of the Centre for Management buyout and Private Equity Research .

DİVERSİFİCATİON

In finance, diversification means reducing risk by investing in a variety of assets..

Diversification is one of two general techniques for reducing investment risk. The other is hedging. Diversification relies on the lack of a tight positive relationship among the assets' returns, and works even when correlations are near zero or somewhat positive…

It is important to remember that diversification only works because investment in each individual asset is reduced.

DEREGULATİON AND THE REGULATORY ENVİRONMENT

Single European Market For Financial Services

Efficient risk capital markets play a major role in innovative high-growth SMEs and the creation of new and sustainable jobs. The benefits of a Single Market should accrue to

all the users of the market as well as to the European economy at large.

FİNANCİAL SERVİCES ACTİON PLAN

Three strategic objectives; establishing a single market in wholesale financial services making retail markets open and secure strengthening the rules on prudential supervision.

OBSTACLES TO THE CREATİON OF A SİNGLE EUROPEAN FİNANCİAL MARKET

DEVELOPMENTS İN RETAİL FİNANCİAL SERVİCES

The retail financial services industry has become an increasingly important segment of european banking business.

PRİVATE BANKİNG

The global private banking business is worth around $20 trillion, of which one third is held offshore assets under manegement have grown around 6 per cent annually since the mind-1990 and the trend is likely to continue at this rate to 2010.

PRİVATE BANK RANKİNGS

Rank 10 Company Rank 09

1 JPMorgan 3

2 Goldman Sachs 2

3 UBS 1

4 Credit Suisse 6

5 HSBC 4

6 Citigroup 5

7 Pictet 8

8 Deutsche Bank 7

9 Rothschild 11

10 BNP Paribas 10

THE TEN LARGEST GLOBAL PRİVATE BANKS AS OF DECEMBER 31, 2010 ARE AS FOLLOWS (LISTED BY ASSETS)

1.BANK OF AMERICA ($1.740 TRILLION)2.UBS ($1.593 TRILLION)3.MORGAN STANLEY ($1.508 TRILLION)4.WELLS FARGO ($1.218 TRILLION)5.CREDIT SUISSE ($775 BILLION)6.JP MORGAN ($636 BILLION)7.ROYAL BANK OF CANADA ($379 BILLION)8.HSBC ($379 BILLION)9.DEUTSCHE BANK ($272 BILLION)10.PICTED & CIE ($243 BILLION)

PERFORMANCE İN EUROPEAN BANKİNG

In recent years, the utilization of information technology has been magnificently increased in service industries, particularly, the banking industry, which by using Information Technology related products such as internet banking, electronic payments, security investments, information exchanges (Berger, 2003), financial organizations can deliver high quality services to client with less effort.Whitten et al. (2004, .), stated that “information is an arrangement of people, data, process, and information technology that interact to collect, process, store and provide as output the information needed to support an organization,” which indicates that information system is an arrangements of groups, data, processes and technology that act together to accumulate, process, store and provide information output needed to enhance and speed up the process of decision making.

PERFORMANCE İN EUROPEAN BANKİNG

During last decade, high percentage of financial organizations are frequently utilize computers technology to facilitate provides services; and that the speed of adoption is expected to grow further as the technology expands. The introduction of electronic indicates of data accumulation, accessing and manipulation assisting the process of banking decision making.In a Bank’s information system, there are always potentials of crisis which make the bank endure an insufficiency; thus, advanced information system supported by a superior mechanism control is required to make certain that an information system has achieved the required processes. Surprisingly, some literatures defense the idea of Solow Paradox in concluding that Information Technology may essentially affect negatively on banks efficiency and may reduce productivity.

PERFORMANCE İN EUROPEAN BANKİNG

This notion was noted by Solow (1987), "you can see the computer age everywhere these days, but in the productivity statistics". The paradox has been defined by E. Turban, et al. (2008) as the “discrepancy between measures of investment in information technology and measures of output at the national level.” Since 1970s to the time Solow was claiming that there was a huge decelerates in growth as the technologies were becoming ubiquitous.In an article by Shu and Strassmann (2005), a survey was conducted on 12 banks in the US for the period of 1989-1997. They noticed that even though Information Technology has been one of the most essential dynamic factors relating all efforts, it cannot improve banks’ earnings. However, conversely, there are many literatures approving the positive impacts of Information Technology expenses to business value.

PERFORMANCE İN EUROPEAN BANKİNG

Kozak (2005) investigates the influence of the evolution in Information Technology on the profit and cost effectiveness of the banking zone during the period of 1992-2003. The study indicates optimistic relationship among the executed Information Technology and together productivity and cost savings. Brynjolfsson and Hitt (2000) indicates that "Information Technology contribute significantly to firm level output." They determine that Information Technology capital contributes an 81% marginal increase in output, whereas non Information Technology capital contributes 6%. Likewise they illustrate that Information System professionals are more than twice as productive as non- Information System professionals.Ordinarily, recent literatures showed that the relationship concerning Information technology and banks’ performance have two encouraging outcomes. Firstly, Information technology can bring down the operational costs of the banks (the cost advantage).

PERFORMANCE İN EUROPEAN BANKİNG

For instance, internet technology facilitates and speeds up banks procedures to accomplish standardized and low value-added transactions such as bill payments and balance inquiries processes via online network. Consequently, this technology will helps banks concentrating their capitals on exceptional, highvalue added transactions such as personal trust services and investment banking via branches. The second encouraging outcome is that Information Technology can promote transactions between customers within the same network (the network effect) (Farrell and Saloner, 1985; Economides and Salop, 1992). In an article by Saloner and Shepard (1995), data for United States commercial banks for the period 1971-1979 was conducted and illustrated that the interest of network effect is significant in utilizing an Automated Teller Machines (ATMs). Milne 2006 also encourages the notnotion of the above authors.The modernization of IT has set the stage for extraordinary improve in banking procedures throughout the world. For instance the development of worldwide networks has considerably decreased the cost of global funds transfer.

PERFORMANCE İN EUROPEAN BANKİNG

The task of Information Technology in the community, restricted and foreign sector banks is to evaluate and measure the observation of the Bank Employees towards the Implementation of Information Technology in the Banks also to assist the awareness and fulfillment of the clients with the banks. Information Technology has been giving clarification to financial organization to take care of their accounting and back office requirements. It also facilitates and speeds up the automation of modern supply controls, such as Automated Teller Machines, Net Banking, Mobile Banking and the akin to. Since organizational performance cannot be shaped only by IS applications, other factors such as business strategies and organizational culture should also be taken into consideration while measuring the impact.The extent of utilizing banks of information technology will be measured by the volume of investment in equipment, and the volume of investment in the software and the use of Internet Banking, Phone Internet, the number of ATM, the use of Cyber Branch and Banking via SMS.

The collection of data on a sample study of Jordanian banks in all 15 of the Banks over a period of five years from 2003-2007 will be collected. Since the study sample is a group of banks which is the nature of scan data via a set of past data, appropriate regression model to measure this relationship is the Pooled Data Regression.

CORPORATE BANKİNG

Corporate finance is the field of finance dealing with financial decisions that business enterprises make and the tools and analysis used to make these decisions. The primary goal of corporate finance is to maximize.

INVESTMENT BANKİNG

Investment banking is a field of bsnking that aids companies in acquiring funds. In addition to the acquisition of new funds, investment banking also offers advice for a wide range of transactions a company might engage in.

Through investment banking, and institution generates funds in two different ways. They may draw on public funds through the capital market by selling stock in their company, and they may also seek out venture capital or private equity in exchange for a stake in their company.

TECHNOLOGİCAL DEVELOPMENTS AFFECTİNG EUROPEAN BANKS

Technological innovations have transformed most industrial sectors, especially due to the evolution of information-based technologies. In case of the banking industry, due to the role of banks as information-based firms and their role in gathering and analysing information.

TECHNOLOGİCAL DEVELOPMENTS AFFECTİNG EUROPEAN BANKS

Two main factors can be pinpointed as consequences of technological innovation.

First, the production function in banking has become more capital-intensive, given that the share of non-staff costs.

Second, diffusion of information technology is radically transforming banking delivery channels.

TECHNOLOGİCAL DEVELOPMENTS AFFECTİNG EUROPEAN BANKS

These forces are universal and European banks are well placed to take advantage to technological advances. Small banks, however, are not well positioned to develop their own innovation technology. This is a good thing. They can choose to implement best-practice systems when they have been tried and tested by their larger counter parts that have deeper pockets for investing in research and development and new innovative technologies.

Bahar İSTİFLİ Tuba GÜLTEKİN Dila TUNCELİ Merve GÜCÜM Fatih AÇIKGÖZ GÖDE Gürkan İPEK

SOURCES

http://ec.europa.eu http://www.eba.europa.eu