European Banking Forum 20041The Future ofEuropean Retail BankingFrank SchwabFriday, 5thMarch 2004European Banking Forum
European Banking Forum 20042The future of European retail bankingWhere we are ?2.Where do we go to ?3.Where do we come from ?1.
European Banking Forum 200431980 -2000: Europe’s universal bank system European private banks focussed on investmentbanking. Retail banking was largely neglected01,0002,0003,0004,0005,0006,000Dec91Dec92Dec93Dec94Dec95Dec96Dec97Dec98Dec99Dec00Dec01Dec02Dec03DJ EuroStoxx5005001,0001,5002,000199019921994199619982000DomesticCross borderMergers & AcquisitionsSource: OECD Trading & Sales Mergers & Acquisitions IPO’s
European Banking Forum 200441995 - 2000: The hype of e-commerce & onlinebankingCustomerTraditional Retail BankingAttacker The bubble did burst, but additional competition fortraditional retail banks is left and margins decreased
European Banking Forum 20045The future of European retail bankingWhere we are ?2.Where do we go to ?3.Where do we come from ?1.
European Banking Forum 20046Branch and bank density (2002) The UK banking market is the most consolidated,followed by Spain.Branch density per1,000 inhabitantsBank density per100,000 inhabitantsUK Spain Italy Germany France AverageSource: DB Research0.210.640.950.67 0.521.430.463.140.441.700.521.520.00.51.01.52.02.53.03.5No ofinhabitantsNo ofbanksUK Branch 4,762UK Bank 156,250 445ES Branch 1,053ES Bank 149,254 349I Branch 1,923I Bank 69,930 808D Branch 2,174D Bank 31,847 2,232F Branch 2,273F Bank 58,824 952AVG Branch 2,437AVG Bank 93,221 957
European Banking Forum 20047Cost/Income Ratios (Average 1992-2001) The UK banking market is the most profitable,followed by Spain.60.4 60.763.164.367.163.15859606162636465666768UK Spain Italy Germany France AverageCIR in %Source: DB Research
European Banking Forum 20048Average = 4.305154550556065707580BNPINGBarclaysLloydsCrédit SuisseUBSCitibankUniCreditoRaiffeisenb.Banca FideuramAverage = 63.4Citibank PCMLP (42% growth)Coba(85) ABNAmroHSBCSEBBanco PopularDreba (-1)HVB10DB PBCIncome growth and cost/income ratio of retailbanks across Europe, 1998 - 2001Sources: Annual reports; McKinsey analysisC/I ratio98-01in %Incomegrowth98-01in % Financially successful retail banks can be characterisedby low cost/income ratios and high income growth
European Banking Forum 20049Value creation of different industries50 % 50 %30 % 70 %80 % 20 %20 % 80 %BankingindustryCapital goodsindustryAutomotiveindustryElectricalindustryInternal labour External labourSources: DZ-Bank, CSFB, Roland Berger, 2002 Compared to other industries, banks still have ahigh internal labour rate
European Banking Forum 200410The future of European retail bankingWhere we are ?2.Where do we go to ?3.Where do we come from ?1.
European Banking Forum 200411Disintegration of the traditional banking valuechain Specialisation and development of core competenciescan be a key for success in retail bankingTraditional TrendScoringBusinessDev.ProductDev.ProcessingHRCustomersegmentationMarketingSalesOnline
European Banking Forum 200412German age structure: half of the population isolder than 50 years in 2050 Germany is a front-runner of a dramatic structuralchange of the European age structure1950WomenMen2050WomenMenSource: German Federal Statistical Office
European Banking Forum 200413Financial wealth per capita of European citizensincreases on a high level There is a continuous increasing demand of investmentand asset management productsSource: Organisation for Economic Co-operation and Development48 4731 30 331634776647 47 4429520102030405060708090NetherlandsUKFranceItalyGermanySpainAverage19952000‘000 Euro9,09,97,09,19,66,012,6CAGR
European Banking Forum 200414Scenario 1: Set single focus on older people targets customers older than 55years focus on Central Europe coverage of the full productrange, customised for thisspecial period of life building partnerships withrelevant organisations andnetworks like“http://www.age-platform.org” Older people as the only target group of a retail bankwith focus on Central Europe
European Banking Forum 200415IT spend matters ... Some of the most successful European retail bankshave a high IT spend levelITcost/operatingcosts10%15%20%25%5%Cost / income ratio20% 40% 60% 80% 100%DB PBC20012002MedianMedianCitibank PCUnicreditoBarclaysLloydsCSUBSDresdnerBankHVBBNP ParibaHSBCSCHBBVA
European Banking Forum 200416visibility/publicitylowhighmaturitylow high No single mega trend, but many parallel trends increasethe need for tight alignment of IT and business strategyMobileServicesWebServicesCRMElectronicsignatureIT InfrastructureOutsourcingBPOOutsourcingLINUX“Farms” &“Blades”replacementof OS/2networkbandwidthPrivate & Business Clients – Rahmenbedingungen zur Strategieentwicklung... and information technology can be a source ofcompetitive advantageOffshoreApplicationOutsourcingBusinessintelligence
European Banking Forum 200417European union: eastern enlargement1 Estonia2 Latvia3 Lithuania4 Poland5 Czech Republic6 Slovakia7 Hungary8 Slovenia9 Romania (2007)10 Bulgaria (2007)11 Malta12 Cyprus13 Turkey (open) Increase of existing European market by 75 millioninhabitants to 375 million customer on 1stof May 2004
European Banking Forum 200418Scenario 2: Serve the “not banked” customer“Small loan terminal” targets “non bank” customer inEastern Europe small loans up to 500 Euro above average interest rate placed at supermarkets,retailers, malls online authentication by phonenumber, social security number,address, date of birth, ... online scoring instant loan, paid cash andcash pay back“Small loan”terminal “Small loan terminal” as the single business activity ofa specialised retail bank in the Eastern Europe market
European Banking Forum 200419Whatever strategy you choose ...... be excellent !Excel your customers’ expectationExcel in training andmotivating your employeesExcel the qualityof your processes Excellence in these three dimension leads tosustainable financial success
European Banking Forum 200420Thank you !Let’ s discover our individualFutures of the European Retail Bankingand discuss possible co-operations & solutionsin the sessions of the next two days.
European Banking Forum 200421Frank@FrankSchwabSpeaks.comFrank@FrankSchwabSpeaks.comhttp://www.FrankSchwabSpeaks.comhttp://www.FrankSchwabSpeaks.comDid you hear me speak ?Did you hear me speak ?
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