European Banking Barometer – 1H14 Confidence masks challenges
Aug 06, 2015
European Banking Barometer – 1H14
Contents
Page1 Economic environment 82 European sovereign debt crisis 113 Business outlook and focus areas 144 Business priorities and product line expectations 315 Headcount and compensation 456 Contacts 54
Page 2
European Banking Barometer – 1H14
Introduction
We have developed the European Banking Barometer to provide our clients with a benchmark and overview of the macro-economic outlook and its impact on the European banking industry, as well as the priorities banks will focus on over the next six months.Now in its fifth edition, the latest biannual study consists of 294 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 March and April 2014. We interviewed respondents from a range of financial institutions covering at least 50%* of banking assets in each market.
A range of bank types were interviewed in each market to help ensure the study was a fair reflection of each country’s banking industry. Interviews were not conducted with subsidiaries of member/group banks.
The results in this report are presented in an aggregate market format and shown in percentages. Aggregated European-wide results have been weighted in proportion to countries’ banking assets. All country-level data is unweighted.
Please note, some charts may not add up to 100%, and net increase totals may differ slightly from the numbers shown in the charts, as percentages have been rounded to the nearest whole number. Where possible, we have compared and contrasted the data against our European Banking Barometer – 2H13.
We would like to thank all the research participants for their contributions to the study.
If you would like to take part in our next European Banking Barometer study, please speak to your usual EY contact or refer to your local country contact on page 55.
Page 3
* Except in Austria, where they represent 45% of banking assets, Italy 39% and the Nordics 42%.
European Banking Barometer – 1H14Page 4
Composition of the survey sample by bank type
15
14
12
12
47
Bank type*
Universal (large-scale banking group/major bank)
Corporate and investment
Private bank/wealth manager
Specialist (e.g., consumer credit, savings, or a bank that doesn’t offer a current account)
Retail and business (SME business banking)
* Numbers in the pie chart reflect the percentage of respondents who answered. Percentages were calculated using unweighted data. 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 headquartered in Germany) were reallocated to corporate and investment banks; private bankers were reallocated to private banks/wealth management; savings banks and cooperative banks were reallocated to retail and business banks; and central building societies, building loan associations and mortgage banks were reallocated to specialist banks. 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.
European Banking Barometer – 1H14
Composition of the survey sample by bank type
Market Total Universal Corporate and
investment
Private bank/wealth
management Specialist
Retail and business
(cooperative)
Retail and business
(state owned)
Retail and business (privately
owned)
Austria 13 7 2 0 2 2 0 0Belgium 17 2 3 2 1 3 1 5France 30 6 5 5 2 3 2 7Germany 103 6 7 6 7 28 44 5Italy 20 3 4 2 3 6 0 2Netherlands 7 3 0 0 2 1 0 1Nordics 20 4 2 3 8 1 0 2Poland 12 7 1 0 2 0 2 0Spain 20 2 1 6 3 0 2 6Switzerland 17 2 0 5 1 1 3 5UK 35 3 16 6 4 0 0 6
Europe** 294 45 41 35 35 45 54 39
Page 5
Type of bank*
* 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 headquartered in Germany) were reallocated to corporate and investment banks; private bankers were reallocated to private banks/wealth management; savings banks and cooperative banks were reallocated to retail and business banks; and central building societies, building loan associations and mortgage banks were reallocated to specialist banks. 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.
** European totals in the table reflect the unweighted number of respondents who answered. All European aggregated percentages in the report are weighted in proportion to markets’ banking assets, as reported by The Banker database, June 2013. All market level figures in this report reflect unweighted data.
European Banking Barometer – 1H14
European overview
The gradual recovery of European banks is expected to continue. Most bankers remain positive about the economy and their bank’s performance, but the sector isn’t out of the woods yet. After a significant swing towards optimism in our previous edition, our latest survey reveals that a few more bankers expect the economy to improve but most only anticipate slight improvement. Most respondents also expect improved financial performance from their banks but, again, this will only be slight. Investors might hope that a sector with stronger balance sheets, and an increased focus on growth initiatives, would hasten a return to greater profitability. However, with bankers expecting only an average 1.6% increase in return on equity (ROE), and remaining preoccupied by risk and regulatory issues, there is little evidence that this will happen anytime soon.The recovering economy has yet to translate into a meaningful improvement in bank profitability.► Economic optimism is now more pronounced, with 64% of respondents expecting their market’s economic outlook to improve,
compared with 54% in 2H13. Concerns about the exposure of banks to sovereign debt have also stabilized.
► As a result, 60% of respondents expect their bank’s financial performance to improve over the next six months. Bankers are positive about the outlook for most business lines, particularly private banking and wealth management where 59% believe the outlook is good – reflecting its capital-light model and the growing wealth of high net worth individuals since the global financial crisis.
► However, with bankers anticipating an average revenue increase of just 2.4%, and cost reduction of a mere 0.5%, any improved financial performance will be modest. EY’s analysis suggests that, without more meaningful restructuring, bankers will struggle to achieve even the 1.6% uplift in ROE they are hoping for. Furthermore, we estimate that banks would need to simultaneously reduce costs by about 12% and increase revenues by about 15% just to exceed their cost of equity.
Balance sheets continue to strengthen and more banks are beginning to focus on growth.► Although most banks will continue to shrink their balance sheets, only 8% anticipate raising additional capital following the Asset
Quality Review (AQR) and stress tests. Furthermore, due to the improving economic climate, 23% of banks expect to be able to release reserves, compared with just 14% in our previous survey.
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European Banking Barometer – 1H14
European overview
► Stronger balance sheets will allow banks to focus more on growth. Fifty-seven percent of respondents now expect their banks to launch initiatives to promote growth, compared with 49% in our previous survey. Furthermore, 51% now expect to increase lending to customers, compared with 44% in 2H13.
► Corporate lending policies will continue to loosen for many sectors – with small and medium-sized enterprises (SMEs) expected to benefit most. Forty-five percent of bankers expect lending policies to the SME sector will become less restrictive in the next six months.
Industry restructuring is slowing.► Compared with the last edition slightly fewer respondents expect to buy or sell assets in the next year. Nevertheless, 65% of
banks still expect to see significant consolidation in the industry within the next three years.
► Following significant restructuring across the industry, fewer banks now expect to see further headcount reductions with just 38%of respondents forecasting additional cuts, compared to 42% six months ago. In some markets, such as the UK and the Nordics, banks expect to recruit staff into growth businesses. But in retail banking and back office functions most are expecting more cuts.
But banks are still grappling with the impact of new regulation.► The top three priorities for banks relate to risk and regulation. Compliance is one of the few business areas where headcount is
expected to grow – suggesting that banks continue to struggle with the regulatory burden.
► With regulators increasingly concerned by conduct and consumer protection issues, reputational risk and cybersecurity have emerged as key priorities for banks, especially in Belgium, France, the Netherlands and Switzerland.
They may also struggle to justify expected pay rises.► Twenty-seven percent of respondents expect pay to rise in the coming year. The small minority of respondents anticipating
double-digit pay hikes at their banks will need to deliver returns well above the industry average, or risk angering investors.
Page 7
European Banking Barometer – 1H14
1 8 27 56 8
Across Europe, more bankers are becoming optimistic about their market’s economic recovery …
How do you expect the general economic outlook in your market to change over the next six months?*
Page 9
* Numbers reflect the percentage of respondents who answered. Base excludes respondents who answered “Don’t know.”
Comments: The economic optimism of European bankers is now even more pronounced than in our European Banking Barometer – 2H13.Our previous survey was the first in which a majority (54%) of respondents expected the economic outlook for their country to improve. Even more banks (64%) now anticipate economic recovery. This positivity reflects broader macro-economic improvements; the IMF has recently revised its Eurozone GDP forecast upwards, and the region is expected to see increased demand driven by higher consumption and arevival of investment. Only French bankers remain uncertain about the outlook. The greatest improvement is expected in Italy and the Netherlands – but with both economies contracting in the first quarter, this optimism may be short-lived.
1 10 36 50 4
Worsen significantly Worsen slightly Stay the same Improve slightly Improve significantly
2H13
1H14
European Banking Barometer – 1H14
How do you expect the general economic outlook in your market to change over the next six months?*
7
1
6
5
10
5
6
17
8
6
23
14
24
10
8
10
14
20
43
52
27
35
31
57
76
65
58
80
86
75
50
21
56
59
46
23
20
33
1
3
8
UK
Switzerland
Spain
Poland
Nordics
Netherlands
Italy
Germany
France
Europe
Belgium
Austria
Worsen significantly Worsen slightly Remain at today's levels Improve slightly Improve significantly
1H14
… except in France, which is struggling to regain competitiveness and boost exports
Page 10
2H13Net
increaseNet
increase
23
53
54
0
46
70
86
70
92
80
76
74
* Numbers reflect the percentage of respondents who answered. Base excludes respondents who answered “Don’t know.”
5
1
14
20
6
5
29
10
20
26
50
23
14
29
40
50
37
33
36
38
40
65
50
69
86
36
40
44
59
33
50
63
40
9
8
21
4
UK
Switzerland
Spain
Poland
Nordics
Netherlands
Italy
Germany
France
Europe
Belgium
Austria 20
63
43
-1
54
38
20
43
86
77
50
74
European Banking Barometer – 1H14
Despite a stronger economic outlook, concerns about the sovereign debt crisis refuse to diminish completely ...
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?*
Page 12
* Numbers reflect the percentage of respondents who answered.
8 29 46 15 2
5 31 48 15 1
Significantly decreased impact Slightly decreased impact About the same Slightly increased impact Significantly increased impact
2H13
1H14
Comments: Concerns about the exposure of the European banking sector to sovereign debt have stabilized. Our European Banking Barometer – 2H13 showed a remarkable change in the views of respondents on the impact of the sovereign debt crisis as growth returned to the Eurozone. In 1H13, over one-third of respondents expected the impact of the sovereign debt crisis would increase, but that has fallen to one-sixth in our most recent survey, while over one-third now expect its impact to diminish. However, a small group of bankers are likely to remain concerned about sovereign debt until economic growth becomes truly embedded across the Eurozone, or full banking union breaks the link between banks and sovereigns.
European Banking Barometer – 1H14
… particularly in Austria and France, where more banks expect sovereign debt problems to increase rather than decrease
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?*
Page 13
* Numbers reflect the percentage of respondents who answered.
6
25
10
14
15
5
7
8
8
43
35
20
8
25
43
15
31
17
29
35
15
43
59
20
92
50
43
45
56
47
46
53
38
9
6
25
15
20
7
27
15
12
31
10
5
1
3
2
8
UK
Switzerland
Spain
Poland
Nordics
Netherlands
Italy
Germany
France
Europe
Belgium
Austria
Significantly decreased impact Slightly decreased impact About the same Slightly increased impact Significantly increased impact
1H14
9
15
7
2
5
5
6
35
30
46
50
30
33
29
19
31
38
20
57
50
23
100
36
50
39
44
52
48
50
60
20
15
7
28
24
24
15
6
20
20
1
UK
Switzerland
Spain
Poland
Nordics
Netherlands
Italy
Germany
France
Europe
Belgium
Austria
2H13Net
increase
15
-24
-20
7
-28
-5
-57
-20
-8
-10
-29
-40
Net increase
0
-38
-19
0
-7
-5
-10
-50
0
-46
-10
-44
European Banking Barometer – 1H14
Most bankers still expect their institution’s financial performance to improve …
How do you expect your bank’s overall performance to change over the next six months?*
Page 15
* Numbers reflect the percentage of respondents who answered. Base excludes respondents who answered “Don’t know.”
11 27 53 9
Weaken significantly Weaken slightly Stay the same Strengthen slightly Strengthen significantly
2H13
Comments: Sixty percent of banks expect their financial performance to improve over the next six months. With the leading European banksreporting average full year returns on equity of 3.8%, substantial improvements in financial performance will be required for them to achieve returns that exceed their cost of equity. Sluggish economic growth, persistent ultra-low interest rates, and the potential that the European Central Bank (ECB) will launch its own quantitative easing program mean that if banks want to improve their financial performance they will need to grow revenues through non-interest income and continue to reduce costs aggressively. However, with banks expecting to reduce costs by an average of only 0.5% and grow their revenues by an average of just 2.4% they will struggle to achieve even the 1.6% ROE uplift they are anticipating. EY’s analysis suggests banks would only achieve an uplift in ROE of 0.6% with their revenue growth and cost reduction expectations. Moreover, European banks would need to reduce costs by about 12% and simultaneously increase revenues by about 15% just to exceed their average FY13 cost of equity (9.7%).
1 13 26 50 10
1H14
European Banking Barometer – 1H14
-5.00 -4.00 -3.00 -2.00 -1.00 0.00 1.00 2.00 3.00 4.00 5.00UK
Switzerland
Spain
Poland
Nordics
Netherlands
Italy
Germany
France
Europe
Belgium
Austria
… but an inability to increase revenues and cut costs means they will struggle to deliver meaningful ROE growth
How do you expect your bank’s performance measures to change over the next six months?*
Page 16
* Numbers reflect the mean percentage change expected. Base excludes respondents who answered “Don’t know.”
IncreasePercentage increase
RevenueAverage percentage change
0.46
0.46
2.39
2.73
0.96
0.61
2.14
2.47
4.63
3.71
0.02
5.00
Cost base0.12
-1.67
-0.49
0.50
-0.50
-1.96
-0.91
0.64
-3.77
-2.20
-1.16
0.10
ROE
-0.95
0.02
1.62
1.37
0.37
1.17
1.00
2.36
-0.27
2.97
-0.31
3.88
0.46
0.46
2.39
2.73
0.96
0.61
2.14
2.47
4.63
3.71
0.02
5.00
0.12
-1.67
-0.49
0.50
-0.50
-1.96
-0.91
0.64
-2.20
-1.16
0.10
-0.95
0.02
1.62
1.37
0.37
1.17
2.36
-0.27
2.97
-0.31
3.88
1.00
-3.77
European Banking Barometer – 1H14
83
71
40
67
75
71
75
93
67
74
71
62
14
24
25
25
20
29
10
2
30
19
18
31
3
6
35
8
5
15
4
3
8
12
8
UK
Switzerland
Spain
Poland
Nordics
Netherlands
Italy
Germany
France
Europe
Belgium
Austria
No Maybe Yes
Most banks believe they have already raised sufficient capital to weather the ECB’s AQR and stress test
Does your bank plan to raise capital following the ECB’s AQR and stress test?*
Page 17
* Numbers reflect the percentage of respondents who answered. Base excludes respondents who answered “Don’t know.”
Comments: Just 8% of respondents anticipate raising additional capital following the AQR and stress test. However, the fact that a further 19% think they might have to raise additional capital illustrates a degree of uncertainty and apprehension across the industry about what the AQR will reveal. Several banks have already raised capital levels ahead of the AQR and stress tests. According to Thomson ONE, by the time we completed fieldwork for this survey, Eurozone banks had already raised over US $11 billion of equity this year, compared with just over US $2 billion in the same period in 2013. Since we completed the fieldwork, banks have raised an additional US $24 billion, bringing the total equity raised this year to over US $35 billion.
8
74
19
European Banking Barometer – 1H14
Nevertheless, almost one-third of bankers still expect a further increase in loan loss provisions …
Over the next six months, what do you expect your bank’s total provisions against loan losses to do?*
Page 18
* Numbers reflect the percentage of respondents who answered. Base excludes respondents who answered “Don’t know.”
Comments: Slightly fewer banks now expect to raise loan loss provisions (LLPs) than in our last survey. However, despite improving economic indicators, almost a third still expect to raise LLPs in anticipation of the AQR. This is particularly true in Spain, where banks have been required to revalue their real estate portfolios, and in Austria where banks have significant exposure to Eastern Europe. Nevertheless, the improving economic climate across Europe means 23% of banks now expect to be able to release provisions to boost their financial performance, compared with just 14% in our previous survey.
1 22 46 27 3
2 12 54 24 8
Decrease significantly Decrease slightly Stay the same Increase slightly Increase significantly
2H13
1H14
European Banking Barometer – 1H14
… although in the UK strong economic growth means bankers expect to be able to release provisions
Over the next six months, what do you expect your bank’s total provisions against loan losses to do?*
Page 19
* 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.” Base excludes respondents who answered “Don’t know.”
1 2 3 4 5UK
Switzerland
Spain
Poland
Nordics
Netherlands
Italy
Germany
France
Europe
Belgium
Austria3.50
3.25
3.23
3.33
3.61
3.50
3.00
3.00
3.77
2.87
3.69
3.12
3.10
3.20
3.01
3.25
3.00
2.90
3.00
3.8
3.24
2.69
1H142H13
3.10
3.14
Decrease significantly
Increase significantlyStay the same
European Banking Barometer – 1H14
282830
173025
1534
2112
1616
1919212426262729333639
45
More restrictive Less restrictive
3121
2511
3218
1240
229
1122
1729
1730
2033
292225
4234
45
Transport (incl. automotive and shipping)**Media and telecommunications
Financial servicesInformation technology
ConstructionEnergy, mining and minerals**
Commercial and professional services**Commercial real estate
Retail and consumer products**Health care
Manufacturing and industrials (incl. chemicals, eng.)**SMEs 23
23333
-171715-1218-88
-14
Further easing of corporate lending policies is anticipated for many sectors, reflecting the improved economic outlook
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?*
Page 20
* Numbers reflect the percentage of respondents who answered. Respondents answering “Remain unchanged” 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.
1H142H13Net less
restrictiveNet less
restrictive
Comments: The prospects for corporate lending continue to improve for most sectors. The outlook is most positive for the SMEs, where 45% of respondents expect lending to be less restrictive. Notably, even the tightening of lending policies to the construction and commercial real estate sectors has slowed dramatically from our previous surveys. Nevertheless, despite banks being more willing to lend, overall access to bank credit remains limited and a further loosening of lending policies will be required for Europe to see a return to loan growth.
29232412-5121-47-8-9-9
■ More restrictive ■ Less restrictive
European Banking Barometer – 1H14
3248
3819
412519
411914
2930
1455
242725
1423
19292935
3928
3420
3138
153430
171718
1497
2321
122328
1831
4244
Transport**Media and telecomms
Financial servicesInformation technology
ConstructionEnergy and mining**
Commercial services**Commercial real estate
Retail**Health care
Manufacturing**SMEs
Austria
Germany
Belgium
Italy
France
Netherlands
Lending to SMEs is expected to be less restrictive in all countries except Austria …
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?*
Page 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.
31424238
231715
38
158
4225
3838
6754
3192
546969
3317
5020
5050
1717
1740
3333
1733
1733
1740
5020
Transport**Media and telecomms
Financial servicesInformation technology
ConstructionEnergy and mining**
Commercial services**Commercial real estate
Retail**Health care
Manufacturing**SMEs
3040
2020
401110
4036
940
27
101010
3011
3020
453640
36
25333333
7533
67100
673333
25333333
253333
333333
25
■ More restrictive ■ Less restrictive
European Banking Barometer – 1H14
Nordics
Switzerland
Poland
UK
Spain
… and the Netherlands
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?*
Page 22
* 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.
241212
612
1912
29181812
18
6182424
181318242935
2935
Transport**Media and telecomms
Financial servicesInformation technology
ConstructionEnergy and mining**
Commercial services**Commercial real estate
Retail**Health care
Manufacturing**SMEs
181818
936
18
27
4545
8236
2736
5536
5555
6473
2211
25
2256
221311
22
5644
1333
672222
4438
2267
33
4343
2914
432929
5729
1429
431414
2929
4314
2943
292929
Transport**Media and telecomms
Financial servicesInformation technology
ConstructionEnergy and mining**
Commercial services**Commercial real estate
Retail**Health care
Manufacturing**SMEs
126
2565
1166
18
56
292935
172628
3547
3537
3259
■ More restrictive ■ Less restrictive
European Banking Barometer – 1H14
1 2 3 4 5
Launching initiatives to promote growth
Introduction/increasing incentives to increase customer deposits
Lending to customers
Seeking funding from wholesale capital markets
Repaying central bank funding programs
Reducing loan to deposit ratios
Selling assets outside home markets
Selling assets outside Europe
Reducing the balance sheet
Accessing central bank funding programs
An increasingly favorable operating environment means that more bankers are beginning to prioritize growth initiatives
How likely are the banks in your market to be engaged in the following activities over the next six months?*
Page 23
* 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.”
Comments: An improving economy and stronger balance sheets mean the emphasis bankers are placing on growth, first identified in EY’s European Banking Barometer – 2H13, is now even more prominent. Fifty-seven percent of bankers now anticipate launching initiatives to promote growth, while 51% expect to increase lending to customers – up from 49% and 44%, respectively, in our last survey. Banks in Italy, the Netherlands, Poland and Spain are most focused on growing lending and developing new initiatives to promote growth. That does not mean balance sheets are fully repaired, however, and banks are still recalibrating their funding profiles by repaying central bank funding programs, and turning to deposit funding. Fifty-one percent of bankers expect their banks to introduce incentives to increase customer deposits over the next six months and loan to deposit ratios are also expected to improve.
Significantly less
Significantly more
3.49
3.64
3.30
3.36
3.50
3.19
3.32
3.29
3.33
2.68
3.59
3.44
3.42
3.32
3.27
3.26
3.24
3.22
3.17
2.61
Significantly less
Significantly moreStay the same
1H142H13
European Banking Barometer – 1H14
30
5
5
15
10
5
5
10
5
5
10
10
10
5
5
35
20
30
40
40
35
65
35
55
10
10
25
20
5
15
20
5
10
3028
40
39
14
22
29
21
23
25
14
4
8
9
2
4
2
1
7
1
13
8
10
18
16
10
13
10
19
23
2
5
2
13
10
11
14
13
10
12
23
37
43
30
40
30
40
23
50
43
3
3
3
10
3
13
3
20
10
20
13
3
7
7
3
7
23
3
7
7
3
3
3
6
24
35
12
35
59
41
53
41
41
12
6
12
18
6
12
41
18
6
6
6
24
6
29
12
24
12
6
6
8
15
23
8
8
38
31
15
8
15
15
23
8
15
15
23
15
15
31
8
23
23
23
38
8
8
31
8
8
8
8
8
8
23
29
43
43
29
71
71
29
43 29
29
14
43
43
29
14
14
14
Austria
Germany
Belgium
Italy
France
Netherlands
They also continue to rebalance their funding profiles by reducing reliance on central banks …
How likely are the banks in your market to be engaged in the following activities over the next six months?*
Page 24
* Numbers reflect the percentage of respondents who answered.
Significantly moreSlightly moreSignificantly less Slightly less
Launching initiatives to promote growth
Introduction/increasing incentives to increase customer deposits
Lending to customers
Seeking funding from wholesale capital markets
Repaying central bank funding programs
Reducing loan to deposit ratios
Selling assets outside home markets
Selling assets outside Europe
Reducing the balance sheet
Accessing central bank funding programs
Launching initiatives to promote growth
Introduction/increasing incentives to increase customer deposits
Lending to customers
Seeking funding from wholesale capital markets
Repaying central bank funding programs
Reducing loan to deposit ratios
Selling assets outside home markets
Selling assets outside Europe
Reducing the balance sheet
Accessing central bank funding programs
European Banking Barometer – 1H14
25
25
40
35
35
35
50
60
35
70
5
10
10
20
5
15
15
25
15
5
35
20
20
15
25
5
15
20
15
5
5
5
29
29
31
26
46
43
49
34
51
6
9
14
3
6
11
9
17
51
29
20
17
17
6
6
11
9
6
11
11
6
6
6
6
3
8
8
17
42
58
67
58
33
8
17
8
42
8
8
25
8
25
25
17
8
8
6
44
35
24
35
12
35
63
41
6
6
6
6
6
12
29
19
6
29
12
24
24
19
24
18
6
6
45
15
15
40
15
10
35
45
40
5
5
10
10
5
10
5
5
20
15
5
20
5
20
5
15
15
5
5
Nordics
Switzerland
Poland Spain
… and introducing initiatives to increase customer deposits
How likely are the banks in your market to be engaged in the following activities over the next six months?*
Page 25
* Numbers reflect the percentage of respondents who answered.
Significantly moreSlightly moreSignificantly less Slightly less
UK
Launching initiatives to promote growth
Introduction/increasing incentives to increase customer deposits
Lending to customers
Seeking funding from wholesale capital markets
Repaying central bank funding programs
Reducing loan to deposit ratios
Selling assets outside home markets
Selling assets outside Europe
Reducing the balance sheet
Accessing central bank funding programs
Launching initiatives to promote growth
Introduction/increasing incentives to increase customer deposits
Lending to customers
Seeking funding from wholesale capital markets
Repaying central bank funding programs
Reducing loan to deposit ratios
Selling assets outside home markets
Selling assets outside Europe
Reducing the balance sheet
Accessing central bank funding programs
European Banking Barometer – 1H14
The current restructuring of the banking sector is slowing, with fewer banks anticipating buying or selling 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?*
Page 26
* Numbers reflect the percentage of respondents who answered. Respondents could select more than one option.
2933
25
38
23 24 24
45
Sell assets Buy assets Partnerships orjoint ventures
None of these
2H13 1H14
Comments: Over the past five years, many banks have sold assets as they have restructured their businesses to reduce complexity, raise capital or focus on core strengths. As a result, the number of bankers expecting asset sales (and accompanying purchases) has fallen. The majority of remaining asset sales are expected to be in Europe, as most banks have already exited non-core overseas franchises. Most asset purchases will also be in Europe. Where banks are considering overseas expansion, alliances are often the most attractive option. This is not only due to regulatory requirements in these markets, but also because many banks have learned from their previous mistakes of over-expansion. Joint ventures or partnerships can help banks gain exposure to high-growth markets without major upfront investment, as highlighted in EY’s 2014 report Banking in emerging markets: investing for success.
European Banking Barometer – 1H14
… except in Spain and the Nordics where more banks expect to buy and sell 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?*
Page 27
* Numbers reflect the percentage of respondents who answered. Respondents could select more than one option.
Sell assets Buy assets Partnerships or joint ventures None of these
35
40
38
10
39
17
43
29
31
40
26
12
45
17
15
14
35
7
23
23
35
38
UK
Switzerland
Spain
Poland
Nordics
Netherlands
Italy
Germany
France
Europe
Belgium
Austria
43
30
15
13
21
30
11
15
57
33
38
10
17
18
40
0
30
14
15
10
40
24
24
31
1H142H13
30
20
46
25
14
40
28
15
24
25
13
10
23
29
30
17
10
14
20
14
37
24
29
15
22
40
23
63
71
40
50
63
19
38
38
50
51
59
5
67
50
57
45
73
30
45
35
23
0
0
European Banking Barometer – 1H14
For banks thinking about expansion, particularly outside of Europe, collaboration is seen as increasingly important
In which regions is your bank likely to sell assets, buy assets or consider joint ventures over the nextsix months?*
Page 28
* Numbers represent the total number of mentions for that particular region. Respondents could state more than one region.
1
5
4
9
9
12
0 5 10 15
Joint ventures
Sell assets
Buy assets
North America
5
7
5
15
5
8
0 2 4 6 8 10 12 14
Joint ventures
Sell assets
Buy assets
Asia Pacific
31
36
41
43
46
47
0 20 40
Joint ventures
Sell assets
Buy assets
Europe
2
1
2
8
4
1
0 5 10
Joint ventures
Sell assets
Buy assets
South America
1
2
2
5
6
0 2 4 6 8
Joint ventures
Sell assets
Buy assets
Middle East
4
5
3
6
5
2 4 6 8 10
Joint ventures
Sell assets
Buy assets
Across the world
1H142H13
European Banking Barometer – 1H14
I do not anticipate any consolidation Small-scale consolidation Medium-scale consolidation Large-scale consolidation
21
44
29
6
Despite a slowdown in industry restructuring, 65% of banks expect significant consolidation within the next three years
To what extent do you anticipate consolidation of the banking industry over the next 12 months and within the next three years?*
Page 29
* Numbers reflect the percentage of respondents who answered. 1H14 base excludes respondents who answered “Don’t know.”
Within three years12 months
Comments: Despite the significant strides banks have made in strengthening their balance sheets, not only is it still early days for the European economic recovery, but the AQR is in progress. As a result, most institutions remain cautious of major acquisitions in the near term. As a result, only 7% of respondents anticipate large-scale consolidation in the next 12 months – the majority in Spain and France. However, over the next three years 63% of respondents expect medium- or large-scale consolidation. This longer-term consolidation will be focused in countries with a large number of small local banks (such as Spain and Italy) and may be accelerated by the AQR. In countries where the sector is already fairly concentrated (such as the UK), fewer bankers anticipate significant consolidation even in the medium term.
7
28
43
22
1H142H13
Within three years12 months
7
25
43
26
13
41
30
13
European Banking Barometer – 1H14
5
16
40
53
35
32
20
I do not anticipate any consolidation Small-scale consolidation Medium-scale consolidation Large-scale consolidation
Italian banks expect the greatest consolidation of their sector – both in the short and medium term
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?*
Page 30
* Numbers reflect the percentage of respondents who answered. Base excludes respondents who answered “Don’t know.”
Austria Belgium
Germany
Europe
Netherlands
15
8
31
46
46
46
8
3 years
12 months
Nordics
SwitzerlandPoland UKSpain
24
35
65
53
6
12
6
8
27
58
64
33
93 years
12 months
6
22
29
43
44
28
21
7
14
57
57
29
14
14
14 11
42
58
47
21
11
11
20
44
40
35
26
18
14
3
6
6
12
41
47
41
35
12
Italy
5
35
74
60
21
5
France
8
28
62
53
28
18
2
3 years
12 months
17
21
41
54
28
25
14
European Banking Barometer – 1H14
Business priorities and product line expectations
Section 4
Page 31
European Banking Barometer – 1H14
12
14
181818
20
2731
4246
4751
56
812
1313
24
37
40
47
1516
2123
33
39
Off-shoringDisposing of assets or businesses
New remuneration systemsOutsourcing
Reducing the number of productsDiversity requirements relating to CRD IV³
Acquiring new assets or businessesDeveloping partnerships with non-banks
Restructuring the business to comply with regulationsFinancial Transaction Tax
Developing recovery and resolution plansCurrent changes in financial reporting/IFRS
Establishing new business segmentsNew foreign markets/internationalization
Restructuring the business to cut costsThe threat of financial crime
Compliance with consumer regulation/remediationDeveloping/introducing new productsMinimizing non-essential expenditure
Investing in customer-facing technologyCutting costs
Compliance with capital market regulationsCapital and liquidity and the leverage ratio²
Streamlining processesCybersecurity/data security
Reputational risk¹Risk management1H14
Page 32
Risk and regulation remain at the top of banks’ agendas in all markets, but there is a growing division over whether …
* Respondents were asked to rank the importance of activities on a scale of 0 to 10, where 0 denotes “Not at all important” and 10 denotes “Very important.” Numbers show the percentage of respondents selecting either 8, 9 or 10. Base excludes respondents answering “Does not apply.”1 Reputational risk includes tax transparency; compliance with capital markets regulations, i.e., MiFID II/EMIR; and investing in new customer-facing technology, e.g., mobile solutions. 2 For 2H13 survey, capital and liquidity and the leverage ratio were referred to as "Preparing for Basel III/CRD IV." 3 Diversity requirements relating to CRD IV – putting in place a policy to promote diversity on management board.
Rank the importance of the following agenda items for your organization*
Comments: There are no signs that the regulatory burden for banks is diminishing – and with many European regulators increasingly concerned about banks’ conduct, including customer protection, it is no surprise that risk and regulation remain at the top of bankers’ priorities. Reputational risk is seen as particularly important. Recent analysis by the LSE revealed that between 2008 and 2012, conduct costs (including provisions and contingent liabilities), for just 10 leading banks in Europe and the US exceeded US $230bn4 – underscoring the importance of resolving these issues. In this survey we have, for the first time, asked specifically about cybersecurity. This has emerged as a major issue for many financial institutions and is a key concern for banks in Belgium, France, the Netherlands and Switzerland. Beyond risk and regulation, the shift in banks’ focus from survival to growth is highlighted by most items related to innovation and growth moving up several places in our ranking. More banks are now moving from preservation to expansion.
2H13 1H14
Rank order of importance
27-316894
135-
1219161011-
141718-
2321152022
123456789
101112131415161718192021222324252627
Risk and regulationCost cutting and efficiency
Innovation and growth
4 http://blogs.lse.ac.uk/conductcosts/bank-conduct-costs-results/
European Banking Barometer – 1H14
3350
6767
4333
7183
7171
86
14
43
43
43
017
14
29
1161213
629
3750
3714
47
15
49
40
51
34
8
23
Restructuring the business to comply with regulationsFinancial Transaction Tax
Developing recovery and resolution plansCurrent changes in financial reporting/IFRS
Establishing new business segmentsNew foreign markets/internationalization
Restructuring the business to cut costsThe threat of financial crime
Compliance with consumer regulation/remediationDeveloping/introducing new productsMinimizing non-essential expenditure
Investing in customer-facing technologyCutting costs
Compliance with capital market regulationsCapital and liquidity and the leverage ratio²
Streamlining processesCybersecurity/data security
Reputational risk¹Risk management
ItalyGermany3333
3627
1710
3667
1767
50
50
42
50
67
16.79
27
55
Restructuring the business to comply with regulationsFinancial Transaction Tax
Developing recovery and resolution plansCurrent changes in financial reporting/IFRS
Establishing new business segmentsNew foreign markets/internationalization
Restructuring the business to cut costsThe threat of financial crime
Compliance with consumer regulation/remediationDeveloping/introducing new productsMinimizing non-essential expenditure
Investing in customer-facing technologyCutting costs
Compliance with capital market regulationsCapital and liquidity and the leverage ratio²
Streamlining processesCybersecurity/data security
Reputational risk¹Risk management
1921
1921
3848
2937
6045
41
37
34
48
53
2444
45
57
3125
624
1250
4453
6559
65
44
41
71
41
60
12
47
1929
717
1717
3541
1758
63
32
40
35
45
4528
47
22
Page 33
… their next priority is cost-cutting and efficiency, as in Austria, Germany and the Netherlands …
* Respondents were asked to rank the importance of activities on a scale of 0 to 10, where 0 denotes “Not at all important” and 10 denotes “Very important.” Numbers show the percentage of respondents selecting either 8, 9 or 10. Base excludes respondents answering “Does not apply.”1 Reputational risk includes tax transparency; compliance with capital markets regulations, i.e., MiFID II/EMIR; and investing in new customer-facing technology, e.g., mobile solutions. 2 For 2H13 survey, capital and liquidity and the leverage ratio were referred to as "Preparing for Basel III/CRD IV."
Rank the importance of the following agenda items for your organization* Risk and regulationCost cutting and efficiency
Innovation and growth
Austria Belgium France
Netherlands
European Banking Barometer – 1H14
2217
246
5032
3742
405555
15
55
50
45
3260
35
35
120
1621
110
5033
3763
47
0
17
16
47
116
21
35
Restructuring the business to comply with regulationsFinancial Transaction Tax
Developing recovery and resolution plansCurrent changes in financial reporting/IFRS
Establishing new business segmentsNew foreign markets/internationalization
Restructuring the business to cut costsThe threat of financial crime
Compliance with consumer regulation/remediationDeveloping/introducing new productsMinimizing non-essential expenditure
Investing in customer-facing technologyCutting costs
Compliance with capital market regulationsCapital and liquidity and the leverage ratio²
Streamlining processesCybersecurity/data security
Reputational risk¹Risk management
Switzerland
Nordics Poland
UK
1800
29
1829
5959
7153
82
24
35
53
35
180
35
47
Restructuring the business to comply with regulationsFinancial Transaction Tax
Developing recovery and resolution plansCurrent changes in financial reporting/IFRS
Establishing new business segmentsNew foreign markets/internationalization
Restructuring the business to cut costsThe threat of financial crime
Compliance with consumer regulation/remediationDeveloping/introducing new productsMinimizing non-essential expenditure
Investing in customer-facing technologyCutting costs
Compliance with capital market regulationsCapital and liquidity and the leverage ratio²
Streamlining processesCybersecurity/data security
Reputational risk¹Risk management
Page 34
… or innovation and growth, as in Spain, Poland and the UK
* Respondents were asked to rank the importance of activities on a scale of 0 to 10, where 0 denotes “Not at all important” and 10 denotes “Very important.” Numbers show the percentage of respondents selecting either 8, 9 or 10. Base excludes respondents answering “Does not apply.”1 Reputational risk includes tax transparency; compliance with capital markets regulations, i.e., MiFID II/EMIR; and investing in new customer-facing technology, e.g., mobile solutions. 2 For 2H13 survey, capital and liquidity and the leverage ratio were referred to as "Preparing for Basel III/CRD IV."
Rank the importance of the following agenda items for your organization* Risk and regulationCost cutting and efficiency
Innovation and growth
Spain
1320
1915
3427
4541
4165
59
25
27
24
44
3223
47
38
1120
3625
4527
2773
5567
83
17
27
50
50
270
45
58
European Banking Barometer – 1H14
Many bankers continue to 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?*
Page 35
* Numbers reflect the percentage of respondents who answered. Respondents answering “Neither good, nor poor” are not displayed. Base excludes respondents answering “Does not apply” or chose not to answer.
19
12
8
10
8
8
10
10
5
3
3
6
3
2
1
3
2
3
35
36
33
32
43
43
40
44
57
3
4
6
9
6
7
13
10
10
Securities trading
Securities services
Transaction advisory (e.g., M&A)
Debt and equity issuance
Deposit business
Corporate banking
Asset management
Retail banking
Private banking and wealth management
27
37
32
33
44
44
39
42
48
7
5
9
9
9
6
10
9
12
15
11
20
9
10
12
9
7
8
1
3
2
3
1
2
4
2
Securities trading
Securities services
Transaction advisory (e.g., M&A)
Debt and equity issuance
Deposit business
Corporate banking
Asset management
Retail banking
Private banking and wealth management
Net increase
50
40
37
40
41
28
19
32
18
Net increase1H142H13
59
42
41
40
39
28
26
24
16
Very goodFairly goodVery poor Fairly poor
Comments: Bankers remain most optimistic about the outlook for private banking and wealth management. It is a particularly attractive segment, given its capital-light business model, and it is also a growing market. The wealth of EU28 billionaires has almost doubled since 2009 and grew around 23% in the last year alone, and is illustrative of increasing affluence of high net worth individuals. However, while the majority of bankers in all markets expect the outlook to improve for this business, it is also likely to be a very competitive segment. Bankers also expect an improved outlook for retail and corporate banking. With signs of an economic recovery in Europe, respondents are clearly hopeful that both businesses and individuals will look to borrow and invest. The outlook is less positive for securities services and trading; investment banks continue to suffer from the decline in fixed income businesses.
European Banking Barometer – 1H14
19
6
20
50
6
5
13
10
7
8
6
10
6
3
2
19
44
61
64
40
50
47
55
46
44
36
25
19
6
6
18
20
11
8
10
21
8
UK
Switzerland
Spain
Poland
Nordics
Netherlands
Italy
Germany
France
Europe
Belgium
Austria
63
44
68
70
75
33
53
63
48
57
77
40
4
6
21
10
13
33
6
8
12
10
0
10
4
13
5
33
3
4
5
10
4
2
8
3
10
UK
Switzerland
Spain
Poland
Nordics
Netherlands
Italy
Germany
France
Europe
Belgium
Austria
… with the strongest performance expected in wealth management, retail banking …
How do you rate the outlook for your bank over the next six months in each of the following business lines?*
Page 36
* Numbers reflect the percentage of respondents who answered. Respondents answering “Neither good, nor poor” are not displayed. Base excludes respondents answering “Does not apply” or chose not to answer.
Retail bankingPrivate banking and wealth management
Corporate banking
56
36
42
80
25
40
56
39
38
43
42
23
7
16
10
13
2
12
7
8
14
20
6
8
15
8
17
15
6
2
1
8
8
UK
Switzerland
Spain
Poland
Nordics
Netherlands
Italy
Germany
France
Europe
Belgium
Austria
Very goodFairly goodVery poor Fairly poor
38
44
60
25
55
25
30
33
42
40
46
30
25
6
30
9
20
3
8
13
10
4
13
5
9
75
5
9
4
10
15
4
2
4
3
8
20
UK
Switzerland
Spain
Poland
Nordics
Netherlands
Italy
Germany
France
Europe
Belgium
Austria
Asset management
European Banking Barometer – 1H14
30
53
63
30
43
50
24
33
25
36
27
27
5
11
6
3
4
9
9
20
13
5
20
25
6
16
13
12
6
1
4
3
27
9
UK
Switzerland
Spain
Poland
Nordics
Netherlands
Italy
Germany
France
Europe
Belgium
Austria
13
17
12
13
17
5
10
8
11
6
12
3
8
39
17
6
55
36
80
13
20
43
32
42
11
4
29
45
6
3
5
9
22
UK
Switzerland
Spain
Poland
Nordics
Netherlands
Italy
Germany
France
Europe
Belgium
Austria
36
31
50
64
33
20
22
53
53
43
69
33
8
6
17
9
11
5
3
6
8
4
13
11
20
11
8
7
8
13
20
6
1
2
17
UK
Switzerland
Spain
Poland
Nordics
Netherlands
Italy
Germany
France
Europe
Belgium
Austria
Deposit business
4
7
6
17
20
18
9
8
33
4
7
6
7
9
6
10
22
43
20
50
44
17
40
29
19
35
33
30
22
9
17
11
6
3
4
6
10
11
UK
Switzerland
Spain
Poland
Nordics
Netherlands
Italy
Germany
France
Europe
Belgium
Austria
… and asset management. The outlook also remains very positive for corporate banking …
How do you rate the outlook for your bank over the next six months in each of the following business lines?*
Page 37
* Numbers reflect the percentage of respondents who answered. Respondents answering “Neither good, nor poor” are not displayed. Base excludes respondents answering “Does not apply” or chose not to answer.
Securities services
Debt and equity issuance
Very goodFairly goodVery poor Fairly poor
Transaction advisory
European Banking Barometer – 1H14
28
56
53
20
38
20
37
26
32
35
20
45
4
16
3
9
28
19
11
10
13
60
11
13
12
19
30
9
5
2
4
3
10
18
UK
Switzerland
Spain
Poland
Nordics
Netherlands
Italy
Germany
France
Europe
Belgium
Austria
… but is more mixed for investment banking, with securities trading continuing to struggle
How do you rate the outlook for your bank over the next six months in each of the following business lines?*
Page 38
* Numbers reflect the percentage of respondents who answered. Respondents answering “Neither good, nor poor” are not displayed. Base excludes respondents answering “Does not apply” or chose not to answer.
Very goodFairly goodVery poor Fairly poor
Securities trading
European Banking Barometer – 1H14
5
8
4
5
13
1
2
3
2
41
45
47
48
50
3
7
7
6
8
Credit cards
Personal savings and deposits
Personal investment products
Personal loans
Personal real estate loans
36
54
46
48
50
3
5
8
5
6
4
8
5
8
16
2
1
2
2
Credit cards
Personal savings and deposits
Personal investment products
Personal loans
Personal real estate loans
Bankers expect growth in demand for credit and investment products to persist as the economy recovers …
How do you expect customer demand for retail products at your bank to change over the next six months?*
Page 39
* Numbers reflect the percentage of respondents who answered. Respondents answering “Stay the same” are not displayed. Base excludes respondents answering “Does not apply.”
1H142H13Net
increase
39
44
47
49
35
Net increase
44
49
48
42
38
Comments: The improved outlook for retail banking is clearly driven by an anticipated increase in demand for all credit and investment products. The combination of falling unemployment, a more stable economy and ultra-low rates across Europe will allow more individuals –at least for the moment – to take on debt at low interest rates. Fifty-eight percent of banks expect demand to increase for real estate and 51% for personal loans, respectively. Low interest rates are also driving the increased demand for personal investment products. With deposit rates at minimal levels, we expect customers across Europe to look for alternative ways to improve the return on their savings.
Increase significantlyIncrease slightlyDecrease significantly Decrease slightly
European Banking Barometer – 1H14
6
5
11
5
4
4
13
1
4
3
8
14
39
38
53
56
86
33
77
45
43
47
46
43
6
6
21
8
4
7
8
14
UK
Switzerland
Spain
Poland
Nordics
Netherlands
Italy
Germany
France
Europe
Belgium
Austria
Personal loans
56
38
72
67
25
33
54
48
43
48
42
38
11
6
11
13
1
5
6
13
33
8
9
5
5
8
13
UK
Switzerland
Spain
Poland
Nordics
Netherlands
Italy
Germany
France
Europe
Belgium
Austria
UK
Switzerland
Spain
Poland
Nordics
Netherlands
Italy
Germany
France
Europe
Belgium
Austria
… with much greater demand for real estate loans anticipated in the Nordics and Italy, for personal loans in Spain …
How do you expect customer demand for retail products at your bank to change over the next six months?*
Page 40
* Numbers reflect the percentage of respondents who answered. Respondents answering “Stay the same” are not displayed. Base excludes respondents answering “Does not apply.”
41
31
61
89
25
67
31
37
57
45
46
33
6
6
15
5
13
7
11
19
11
11
8
18
8
8
22
33
2
11
Personal savings and deposit products
Personal real estate loans
31
69
50
33
100
33
77
58
33
50
62
38
19
11
11
9
10
8
13
6
11
11
67
8
5
24
13
23
6
6
1
2
8
UK
Switzerland
Spain
Poland
Nordics
Netherlands
Italy
Germany
France
Europe
Belgium
Austria
Personal investment products
Increase significantlyIncrease slightlyDecrease significantly Decrease slightly
European Banking Barometer – 1H14
… the UK and Poland, and for credit cards in the Netherlands
How do you expect customer demand for retail products at your bank to change over the next six months?*
Page 41
* Numbers reflect the percentage of respondents who answered. Respondents answering “Stay the same” are not displayed. Base excludes respondents answering “Does not apply.”
Credit cards
6
7
6
21
2
5
5
1
1
8
31
40
53
33
25
100
43
37
43
41
42
13
6
3
5
3
13
UK
Switzerland
Spain
Poland
Nordics
Netherlands
Italy
Germany
France
Europe
Belgium
Austria
Increase significantlyIncrease slightlyDecrease significantly Decrease slightly
European Banking Barometer – 1H14
11
11
10
11
12
7
6
6
6
1
29
24
28
32
53
2
7
3
7
5
Hedging products
Equity issuance/IPOs
M&A advisory
Debt issuance
Corporate loans
27
21
33
36
50
5
9
8
5
10
15
13
11
7
7
7
4
2
3
Hedging products
Equity issuance/IPOs
M&A advisory
Debt issuance
Corporate loans
Demand is still expected to increase for corporate products, albeit at a lower rate than in 2H13
Page 42
* Numbers reflect the percentage of respondents who answered. Respondents answering “Stay the same” are not displayed. Base excludes respondents answering “Does not apply.”
1H142H13Net
increase
54
32
29
12
11
Net increase
44
22
16
13
13
Comments: A more stable economy is also allowing companies to begin to think about expansion. Improvement in the Composite European Purchasing Managers Index, which tracks projected spending and production levels, suggests that European corporations will increase their capital expenditure. This expansion and investment will drive demand for advisory services and financing in the coming months. The greatest rise in demand is expected to be for corporate loans, and is most stark in Poland and the Nordics where 100% and 75% of respondents, respectively, expect this to increase. Demand for capital markets financing is also expected to increase, though much less rapidly, suggesting that a structural shift in the way European companies raise money is some way off.
Increase significantlyIncrease slightlyDecrease significantly Decrease slightly
How do you expect customer demand for corporate products at your bank to change over the next six months?*
European Banking Barometer – 1H14
30
36
50
67
57
50
31
17
28
32
13
43
10
11
15
3
11
7
13
14
15
14
10
8
14
11
11
29
10
14
11
6
13
UK
Switzerland
Spain
Poland
Nordics
Netherlands
Italy
Germany
France
Europe
Belgium
Austria
Demand for debt, in the form of corporate loans and bonds, is expected to increase in almost all markets …
How do you expect demand for corporate products at your bank to change over the next six months?*
Page 43
* Numbers reflect the percentage of respondents who answered. Respondents answering “Stay the same” are not displayed. Base excludes respondents answering “Does not apply.”
55
27
60
89
75
60
54
59
52
53
33
30
5
7
10
11
15
4
5
20
18
7
13
40
8
5
10
12
22
30
7
1
1
10
UK
Switzerland
Spain
Poland
Nordics
Netherlands
Italy
Germany
France
Europe
Belgium
Austria
Corporate loans Debt issuance
33
8
40
75
20
50
50
12
22
28
43
17
5
0
0
7
2
6
3
17
14
23
0
8
11
10
14
17
7
14
11
6
14
17
UK
Switzerland
Spain
Poland
Nordics
Netherlands
Italy
Germany
France
Europe
Belgium
Austria
M&A advisory
Increase significantlyIncrease slightlyDecrease significantly Decrease slightly
6
18
10
13
33
9
16
6
11
14
17
19
11
6
14
33
18
30
38
40
33
27
9
22
24
29
17
0
10
9
2
6
7
17
UK
Switzerland
Spain
Poland
Nordics
Netherlands
Italy
Germany
France
Europe
Belgium
Austria
Equity issuance/IPOs
European Banking Barometer – 1H14
… but demand for equity financing will be more subdued, especially in Germany and Belgium
How do you expect demand for corporate products at your bank to change over the next six months?*
Page 44
* Numbers reflect the percentage of respondents who answered. Respondents answering “Stay the same” are not displayed. Base excludes respondents answering “Does not apply.”
5
14
10
17
25
8
21
5
11
7
10
8
13
10
7
14
13
55
14
30
78
17
75
38
12
10
29
43
13
7
5
2
13
UK
Switzerland
Spain
Poland
Nordics
Netherlands
Italy
Germany
France
Europe
Belgium
Austria
Hedging products
Increase significantlyIncrease slightlyDecrease significantly Decrease slightly
European Banking Barometer – 1H14
1H14
27 3317
23 2348
A decline is anticipated in overall headcount, but the pace of cuts is expected to slow in most countries ...
Over the next six months, how do you expect the headcount of your bank to change?*
Page 46
* Numbers reflect the percentage of respondents who answered. Respondents answering “Stay the same” are not displayed. Base excludes respondents answering “Don’t know.”
Comments: The number of bankers expecting headcount reductions has fallen and the number expecting job growth has risen. Thirty-eight percent of bankers now expect headcount to fall, compared with 42% in our last survey. Thirty percent of respondents expect headcount to increase, up from 25% in 2H13. A significant number of job losses are anticipated in Austria (53%), France (40%) and Switzerland (35%), where cost-cutting remains a key concern. However, in the Nordics and the UK, where institutions are beginning to focus on growth, 47% and 49% of respondents, respectively, actually expect to increase headcount.
Increase significantlyIncrease slightlyDecrease significantly Decrease slightly
2H13
Net increase
-8
-18
European Banking Barometer – 1H14
23
35
20
27
16
57
50
32
33
31
29
38
3
20
18
5
14
5
3
7
7
18
15
40
18
30
27
47
14
25
21
20
27
29
23
9
5
3
6
8
UK
Switzerland
Spain
Poland
Nordics
Netherlands
Italy
Germany
France
Europe
Belgium
Austria -23
-12
-8
-20
-14
-30
-57
26
-18
-5
-18
23
… and in the Nordics and the UK many bankers now expect staff numbers to increase
Over the next six months, how do you expect the headcount of your bank to change?*
Page 47
* Numbers reflect the percentage of respondents who answered. Respondents answering “Stay the same” are not displayed. Base excludes respondents answering “Don’t know.”
1H14
26
50
31
75
21
30
44
24
43
34
25
40
4
23
7
10
6
12
10
8
13
20
35
20
15
25
43
40
28
12
14
23
31
10
4
10
2
2
6
UK
Switzerland
Spain
Poland
Nordics
Netherlands
Italy
Germany
France
Europe
Belgium
Austria
2H13Net
increase
-50
-1
-18
-39
-22
-22
10
15
-50
-39
-30
9
Net increase
Increase significantlyIncrease slightlyDecrease significantly Decrease slightly
European Banking Barometer – 1H14
4
7
8
9
10
11
11
11
26
27
7
12
18
8
10
27
2
3
6
9
14
14
12
9
25
28
9
10
21
14
12
35
Other head office functions
Operations and IT
Compliance, risk and finance
Corporate banking
Investment banking
Private banking and wealth management
Asset management
Retail and business banking
Recruitment will be focused on growth sectors, such as private banking, as well as compliance functions …
In which areas of the business do you expect headcount to increase or decrease?*
Page 48
* Numbers reflect the percentage of respondents who answered. Base excludes respondents answering that headcount would “Stay the same.”
■ Decrease ■ Increase
1H142H13-25
0
0
-7
-1
-3
-25
-23
Net increase
Net increase
-16
0
3
-7
-3
2
-21
-22
Comments: A seemingly unending wave of regulation and more assertive supervision continues to force banks to recruit staff to strengthentheir compliance departments. Banks are also recruiting in growth areas, such as private banking. However, job losses are expected across other parts of the business. The greatest cuts will continue to be in the head office, operations and IT. A majority of bankers in almost all markets expect cuts to these functions. Twenty-seven percent of respondents also anticipate cuts in retail and business banking, with only bankers in the Nordics anticipating overall job growth in this segment; 31% expect headcount to increase and just 15% expect it to decrease. The outlook is also pretty gloomy for investment bankers – only in the UK, Italy, Spain and Poland do more respondents expect investment bank staff numbers to increase rather than decrease.
European Banking Barometer – 1H14
6
6
13
13
6
13
25
44
6
6
6
6
50
17
17
33
50
17
17
33
17
17
50
7
14
21
14
21
7
14
43
36
7
7
29
14
7
21
11
17
17
17
33
6
11
22
28
9
18
18
27
9
36
18
36
45
18
18
36
Other head office functions
Operations and IT
Compliance, risk and finance
Corporate banking
Investment banking
Private banking and wealth management
Asset management
Retail and business banking
Germany
Belgium
Italy
France
Netherlands
… while job cuts in retail banking …
In which areas of the business do you expect headcount to increase or decrease?*
Page 49
* Numbers reflect the percentage of respondents who answered. Base excludes respondents answering that headcount would “Stay the same.”
Austria
5
10
12
9
5
3
5
9
26
21
9
10
9
3
12
33
Other head office functions
Operations and IT
Compliance, risk and finance
Corporate banking
Investment banking
Private banking and wealth management
Asset management
Retail and business banking
■ Decrease ■ Increase
European Banking Barometer – 1H14
4
8
8
19
27
15
15
12
23
23
8
12
23
4
12
13
13
13
50
25
13
13
13
25
7
7
7
7
27
33
13
47
27
7
13
13
20
20
27
8
8
15
15
31
23
8
15
8
8
8
15
Other head office functions
Operations and IT
Compliance, risk and finance
Corporate banking
Investment banking
Private banking and wealth management
Asset management
Retail and business banking
… and the head office continue unabated
In which areas of the business do you expect headcount to increase or decrease?*
Page 50
* Numbers reflect the percentage of respondents who answered. Base excludes respondents answering that headcount would “Stay the same.”
Switzerland
Poland
UK
SpainNordics
22
11
22
11
22
Other head office functions
Operations and IT
Compliance, risk and finance
Corporate banking
Investment banking
Private banking and wealth management
Asset management
Retail and business banking
■ Decrease ■ Increase
European Banking Barometer – 1H14
4
1
5
15
3
28
2
2
1
5
1
11
+/- 10+%
+/- 8-10%
+/- 5-8%
+/- 2-5%
+/- 1-2%
Total
Even though staff numbers are expected to fall, 28% of bankers expect their pay to increase
Compared to last year (FY13), to what extent will aggregate (i.e., total fixed and performance-related) compensation change at your bank this year (FY14)?
Page 51
* Numbers reflect the percentage of respondents who answered. Respondents answering “Stay the same” are not displayed. Base excludes respondents answering “Don’t know.”
Decrease Increase
Comments: It is perhaps surprising that, given respondents’ expectations of continued industry restructuring and the apparent inability of the sector to meaningfully improve ROE, 25% of banks expect aggregate pay to rise by over 2% in FY14 – above the current rate of inflation in both the euro area and the UK – with 4% expecting double-digit pay rises. There is a risk that with caps on bonuses, some of this rise will become an additional fixed cost for banks at a time when they are struggling to reduce their cost base or grow their revenues. Furthermore, with average ROE expected to remain well below the average cost of equity, banks will need to be able to justify any significant increases for individuals, or risk criticism from shareholders and politicians.
Netincrease
17
2
10
4
-1
3
European Banking Barometer – 1H14
15
16
30
3
1
2
1
7
+/- 10+%
+/- 8-10%
+/- 5-8%
+/- 2-5%
+/- 1-2%
Total
8
8
8
17
25
+/- 10+%
+/- 8-10%
+/- 5-8%
+/- 2-5%
+/- 1-2%
Total
43
43
14
14
14
43
Austria
Germany
Belgium
Italy
France
Netherlands
Page 52
While most bankers across Europe expect their pay to stay the same …
* Numbers reflect the percentage of respondents who answered. Respondents answering “Stay the same” are not displayed. Base excludes respondents answering “Don’t know.”
6
6
12
6
6
12
10
14
24
5
10
5
20
10
5
15
Decrease Increase
Netincrease
-17
0
-8
0
-8
0
Netincrease
0
0
0
0
-6
6
Netincrease
24
0
14
10
0
0
Netincrease
23
15
13
0
-1
-3
Netincrease
5
5
5
0
-10
5
Netincrease
0
-14
29
0
-14
0
Compared to last year (FY13), to what extent will aggregate (i.e., total fixed and performance-related) compensation change at your bank this year (FY14?)?
European Banking Barometer – 1H14
10
5
15
10
10
+/- 10+%
+/- 8-10%
+/- 5-8%
+/- 2-5%
+/- 1-2%
Total
Nordics
Switzerland
Poland
UK
Spain
Page 53
… more than 10% of respondents in Spain and the UK expect double-digit increases!
* Numbers reflect the percentage of respondents who answered. Respondents answering “Stay the same” are not displayed. Base excludes respondents answering “Don’t know.”
27
9
36
11
17
17
6
50
11
11
12
3
9
18
41
3
6
9
6
12
18
6
12
6
24
+/- 10+%
+/- 8-10%
+/- 5-8%
+/- 2-5%
+/- 1-2%
Total
Netincrease
5
0
5
0
10
-10
Netincrease
36
9
27
0
0
0
Netincrease
39
6
6
17
0
11
Netincrease
-6
-6
0
0
0
0
Netincrease
32
0
12
6
3
12
Decrease Increase
Compared to last year (FY13), to what extent will aggregate (i.e., total fixed and performance-related) compensation change at your bank this year (FY14?)?
European Banking Barometer – 1H14
Contacts
For more information on how we can help, please contact our team.
EMEIA:
Robert Cubbage+44 20 7951 [email protected]
Steven Lewis+44 20 7951 [email protected]
Austria:
Friedrich Hief+43 1 21170 [email protected]
Belgium:
Jean-François Hubin+32 2 774 [email protected]
France:
Luc Valverde+33 1 46 93 63 [email protected]
Germany:
Dirk Müller-Tronnier+49 6196 996 [email protected]
Italy:
Massimo Testa+39 02 7221 [email protected]
Netherlands:
Wouter Smit+31 88 407 [email protected]
Nordics:
Lars Weigl+46 8 520 590 [email protected]
Poland:
Iwona Kozera+48 22 557 [email protected]
Spain:
José Carlos Hernández Barrasús+34 91 572 [email protected]
Switzerland:
Philippe Zimmermann+41 58 286 32 [email protected]
UK:
Omar Ali+44 20 7951 [email protected]
Page 55
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About EY’s Global Banking & Capital Markets Center
In today’s globally competitive and highly regulated environment, managing risk effectively while satisfying an array of divergent stakeholders is a key goal of banks and securities firms. EY’s Global Banking & Capital Markets Center brings together a worldwide team of professionals to help you succeed – a team with deep technical experience in providing assurance, tax, transaction and advisory services. The Center works to anticipate market trends, identify the implications and develop points of view on relevant sector issues. Ultimately it enables us to help you meet your goals and compete more effectively.
© 2014 EYGM Limited. All Rights Reserved.
EYG no. EK0289
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This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice.
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