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Meeting the post-financial crisis challenges: five steps for European banks to shape up

Europe’s banking sector is inextricably linked to a complex array of regulatory frameworks, which are evolving to take the past years of global turmoil into account. How can the banking industry halt the contraction and deterioration of equity values?

BearingPoint has examined the past 7 years of performance of 92 banks across the European continent. This report compares the fortunes of these banks (representing 84% of the consolidated European banking balance sheet) to look at the impact of the new banking landscape.

As well as demonstrating that banks have headed towards materially inferior risk/return levels during the last five years, the research looks at the approaches they are implementing in response. The conclusion is clear: cost-efficiency may offer short-term gains, but for future survival, banks need to identify opportunities to innovate and add higher levels of value to their customers.
BearingPoint. Institute Meeting the post-financial crisis challenges: five steps for European banks to shape up Banks are falling out of favour with the markets Since the financial crisis, the price-to-book value of banks has dropped significantly relative to other sectors 1996 1998 2000 2002 2004 2006 2008 2010 2012 9. - 5 MSCI MSCI MSCI MSCI US Europe US banks EU banks - 4 3 Source: Thomson Reuters Datastream The industry is facing unprecedented pressures, a possible sign of structural changes to come Capital dilution Private and Governmental capital injections proved insufficient to consolidate core equity bases. Less than half of the money injected has gone into capital reserves and, five years on, more is still needed to meet new Basel III requirements Job cuts €7bn lawsuits Across major European banks Against major European banks since 2009 With more lay-offs to come as the industry restructures, many will leave the shrinking sector for good as redundancies outpace new hires by roughly two to one Tier-1 capital and total assets, €billion Capital injections 34,000 Capital fed to European banks since €3.65bn 2007 32,000 2009 2010 2011 2012 Embargo 1 667 TOTAL ASSETS €850bn 30,000 Decline of growth 12,959 TIER-1 CAPITAL Only €495bn added since 2007 1,600 €2.62bn Libor 1,400 €380m Fresh capital needed in light of Basel III Misselling 1,200 €350bn requirements 48,335 €391m 1,000 Other 2007 2008 2009 2010 2011 2012 58,413 BEI-003-04-PFC-IN

Meeting the post-financial crisis challenges: five steps for European banks to shape up

shared by BEI on Sep 18
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Europe's post-financial crisis regulatory regime is evolving fast: our study shows banks have to respond with proactive innovation, not squeezing margins


BearingPoint Institute


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