European banking presentation 20.04.2012Presentation Transcript
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 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 FEATURESAND THE CONSOLIDATION TREND Market conditions have undergone extensive changes over recent years.
STRUCTURAL FEATURESAND THE CONSOLIDATION 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 IN THE BANKING 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 ACTIVITY AND THE CONSOLIDATION 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
BANKING SECTOR CONCENTRATION 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.
BANKING SECTOR CONCENTRATION 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.
BANKING SECTOR CONCENTRATION In principle there are two channels through which banking concentration could be transfered into the buyout market. Relationship lending is the first channel.
BANKING SECTOR CONCENTRATION 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.
BANKING SECTOR CONCENTRATION 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 .
DIVERSIFICATION 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.
DEREGULATION AND THE REGULATORYENVIRONMENT 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.
FINANCIAL SERVICES ACTION 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 CREATION OF A SINGLEEUROPEAN FINANCIAL MARKET
DEVELOPMENTS IN RETAIL FINANCIAL SERVICES The retail financial services industry has become an increasingly important segment of european banking business.
PRIVATE BANKING 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.
PRIVATE BANK RANKINGS THE TEN LARGEST GLOBAL PRİVATERank 10 Company Rank 09 BANKS AS OF DECEMBER 31, 2010 ARE AS1 JPMorgan 3 FOLLOWS (LISTED BY ASSETS)2 Goldman Sachs 2 1.BANK OF AMERICA ($1.740 TRILLION)3 UBS 1 2.UBS ($1.593 TRILLION) 3.MORGAN STANLEY ($1.508 TRILLION)4 Credit Suisse 6 4.WELLS FARGO ($1.218 TRILLION)5 HSBC 4 5.CREDIT SUISSE ($775 BILLION) 6.JP MORGAN ($636 BILLION)6 Citigroup 5 7.ROYAL BANK OF CANADA ($3797 Pictet 8 BILLION) 8.HSBC ($379 BILLION)8 Deutsche Bank 7 9.DEUTSCHE BANK ($272 BILLION)9 Rothschild 11 10.PICTED & CIE ($243 BILLION)10 BNP Paribas 10
PERFORMANCE IN EUROPEAN BANKING 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 IN EUROPEAN BANKING 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 IN EUROPEAN BANKING 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 IN EUROPEAN BANKING 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 IN EUROPEAN BANKING 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 IN EUROPEAN BANKING 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 BANKING 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 BANKING 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.
TECHNOLOGICAL DEVELOPMENTS AFFECTINGEUROPEAN 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.
TECHNOLOGICAL DEVELOPMENTS AFFECTINGEUROPEAN 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.
TECHNOLOGICAL DEVELOPMENTS AFFECTINGEUROPEAN 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.