European Banking Study 2019: Profitability remains key issue for European banks-systematic digitalization as a success factor within growing competition (FOTO)

Frankfurt/London (ots) -

Europe's leading banks only achieved slight profit growth in 2018.
The future is likely to bring further pressure due to the persistent
low yield environment and unabatedly rising regulatory costs.
Financial institutions that started to focus on digitalization and
adapt the key success factors of Tech Giants at an early stage
developed much better than other banks.

The European banking industry continued to struggle with
structural earnings problems in 2018. Although Europe's top 50 banks
were able to increase their post-tax return on equity slightly from
6.6% (in 2017) to 7.2% (in 2018), their profitability remains low,
and more than ten years after the financial crisis it is still below
the capital market's requirements. Most of the large European
financial institutions managed neither to achieve sustained increases
in operating earnings nor to improve their cost basis to the required
degree. In addition, when looking ahead, it is clear that competition
will become even fiercer for European banks due to the market entry
of new players from the FinTech and BigTech segment as well as the
growing acceptance of new, non-banking products and services. It
therefore comes as no surprise that especially those banks that
digitalized their business models early on developed particularly
well in Europe. In 2018, their post-tax profitability of 9.2% was not
just clearly above average compared to the largest European credit
institutions, but also above the capital market's requirements.
Consequently, they are digital pioneers and trailblazers for the
entire industry, as zeb's European Banking Study 2019 (EBS) shows.
For this latest edition of its renowned study, the strategy and
management consultancy specializing in the European financial
services industry once again analyzed the 50 largest banks in Europe,
determined their status quo according to various parameters and
calculated scenarios for their future. It is the sixth study in the
series, which was launched in 1998.

Dr. Dirk Holländer, co-author of the EBS 2019 and Senior Partner
at zeb, comments, "Over the past few years, European banks have
managed to improve their capitalization and liquidity significantly.
The key issue, however, is that their profitability continues to be
far too low. Cost reductions alone will not solve this problem. The
banks will have to increase their earnings fundamentally. Simply
hoping for the favorable economic climate to continue or interest
rates to rise may well turn out to be no more than wishful thinking."

Digitalization as an effective lever

The detailed analysis of European banks' current results reveals
striking deficits. On top of that, the European Banking Study also
simulates future developments. Various economic scenarios do not only
take future regulations into account, but also global economic
uncertainty and its implications for banks. In the most likely
scenario, banks' capitalization and profitability will be lower in
2023 than they are today, unless they radically restructure their
business models. This exacerbates the key issue-without considerable
earnings increases and cost reductions, banks will not be able to
close their profit gaps.

Therefore, the latest European Banking Study takes a comprehensive
look at digitalization and its contribution to profitable business
models. The authors of the study found that banks that tackled the
digitalization topic very actively and at an early stage ("pioneers")
tend to achieve a significantly higher financial performance in all
relevant banking KPIs. Moreover, their capital market performance was
clearly above the average of the 50 European banks that were
analyzed. This group of digital pioneers consists mainly of banks
with a strong retail focus as well as less complex universal banks.
They put their strategic focus on digitalization at an early stage,
consistently implemented corresponding measures and communicated them
transparently and confidently towards both the inside and the
outside. Dr. Florian Forst, co-author of the EBS and Partner at zeb,
summarizes, "Our study shows that banks which digitalized their
business models and processes systematically and early on perform
significantly better in all relevant KPIs than their competitors.
These digital pioneers have adapted key success factors of Tech
Giants and proceed along a path that shows how Europe's banks can
continue to be successful even in a highly competitive market."

For further information on the European Banking Study 2019 please
click here: https://www.zeb.eu/europeanbankingstudy

zeb was founded in 1992 and is one of the leading strategy and
management consultancies for financial services in Europe. More than
1,000 employees work for the zeb group in 18 international locations.
In Germany, zeb operates offices in Frankfurt, Berlin, Hamburg,
Munich and Münster (HQ). Its international locations are in
Amsterdam, Copenhagen, Kiev, London, Luxembourg, Milan, Moscow, New
York City, Oslo, Stockholm, Vienna, Warsaw and Zurich. Its clients
include European large-cap and private banks, regional banks as well
as insurers. Several times already, zeb has been classed and
acknowledged as "best consultancy" for the financial sector in
industry rankings.

Pressekontakt:
Franz-Josef Reuter
Head of Public & International Affairs
Phone +49.251.97128.347
Fax +49.251.97128.520
E-Mail Franz-Josef.Reuter@zeb.de

Original-Content von: zeb, übermittelt durch news aktuell