2012 retail banking radar presentation (2)
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2012 retail banking radar presentation (2) 2012 retail banking radar presentation (2) Presentation Transcript

  • Striving Back to Normal?Retail Banking Radar 2012Presentation of Results3 July 2012M Johannsen, C Merx, A Pratz, O Wittig
  • European Retail Banks: Change Looms in Europe■ Continued recovery since the 2009 low: Income almost back at pre-crisis levels (2007), profits still 15 percent below 2007■ Three markets not in line with this trend: Spain, Portugal, Italy face loss of income and increasing risk provisions■ Costs contained, banks shy to make step change in cost base (seen in stable CIR)■ Nordic banks an exception: focus on digital transformation and on cost management – visible in better numbers■ Building resilient models: In light of higher risk levels, capital requirements, client reticence, more efforts to overhaul delivery and service models expected: Operational excellence, Complexity management, Pricing realization, Service innovation, Service excellence, Multi-channel-centric banking A.T. Kearney xx/mm.yyyy/00000 2
  • Income still below / almost back at 2007 level European retail banking P&L development 2007=100 @2011=100 100 98 98 100 Total Income 98 96 Operating Expenses 60 60 59 60 61 59 Risk Provisions 9 13 12 13 13Non-operating Result (1) 3 17 3 2 2 3 -1 Profit before Tax 28 25 22 21 23 24 2007 2008 2009 2010 2011 : Note: (1) Shown as deducted from Total Income, i.e. negative numbers are actually a positive non-operating result and vice versa Source: A.T. Kearney Retail Banking Radar A.T. Kearney xx/mm.yyyy/00000 3 View slide
  • General top-line environment continues to be challengingNet interest margin European banks%4.5 2011 EIU Forecast4.0 (last update 25 May 2012)3.53.02.5 Eastern Europe2.01.51.0 Western Europe0.50.0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016Source: Economist Intelligence Unit (EIU) 2012, partly using OECD Bank Profitability Report A.T. Kearney xx/mm.yyyy/00000 4 View slide
  • Recovery since 2009 – still a way to pre-crisis levelsRetail Banking Radar Income per customer (€) 680 670 Interest income Income per employee relative to total (€, thousand) income 60% 200 62% 64% 650 66% 68% 70% 190 18% 16% 63% 14% 150 12% 61% 10% 165 8% 59% 180 Risk provision Cost-to-Income relative to total 195 ratio 2007 2008 income 210 2009 215 2010 2011 Profit per customerSource: A.T. Kearney (€, before tax) A.T. Kearney xx/mm.yyyy/00000 5
  • Wide spread between country markets in all dimensionsCountry view 2011 Income/ Income/ Risk Provision/ Total Interest Income/ CIR Profit/Customer Customer Employee Income Total income€ Ths. € % € % %Max 1188 369 52 385 7 47 (CH) (SCAN) (UK) (CH) (DE) (PT) 11 62Median 604 106 69 201Min 325 147 76 -7 32 77 (PT) (PT) (AT) (PT) (ES) (UK)Source: A.T. Kearney A.T. Kearney xx/mm.yyyy/00000 6
  • Hugely different income realization from customers acrossEuropeIncome per customer (€, 2011) ■ Swiss, but also Italian banks fare high in realizing income per customer, driven by 1.188 CH • Assets / wealth of customers • Product mix 948 IT • Account pricing • Transaction intensity 725 BNL 681 FR • Consumer lending 621 SCAN 588 AT ■ No correlation with 512 ES • ‘Overbanked‘ or ‚overbranched‘ symptoms 420 DE (Italy, Spain, Germany would need to be low) 359 UK • Pension system situation (Germany to fare better, 325 PT Switzerland/Netherlands/Austria lower) ■ Suspected room for improvement rather within banks business modelsSource: A.T. Kearney A.T. Kearney xx/mm.yyyy/00000 7
  • Interest income has gained in importanceBusiness mix: Interest Income/Total Income (%) 73 69 68 69 70 65 Other European Banks 68 63 55 56 59 59 France 52 Portugal 47 392007 2008 2009 2010 2011Source: A.T. Kearney A.T. Kearney xx/mm.yyyy/00000 8
  • Two crises: Relief on the risk side across Europe – with theexception of three countriesRisk Provision/Total Income (%) 28 IT + ES + PT 21 19 14 16 12 9 10 Other European Banks 11 82007 2008 2009 2010 2011Source: A.T. Kearney A.T. Kearney xx/mm.yyyy/00000 9
  • Profits still notably below 2007 levels, two clusters of countriesProfit per customer (€, before tax) ■ Profits touched bottom in 2009, 25 percent below pre-439 crisis levels 424 ■ Profits still 15 percent below pre-crisis levels, recovering 315 ■ Spain and Portugal first more stable, now exhibiting221 downward trend 205 185 183 147 Other European Banks 162 76 ES + PT2007 2008 2009 2010 2011Source: A.T. Kearney A.T. Kearney xx/mm.yyyy/00000 10
  • Slow start into 2012 – uncertainty in Europe■ Comparably positive drivers at work: ECB Long Term Refinancing Operations (Nov 2011, Mar 2012); stock market recovery – but still uncertainty on Euro and sovereign situation■ Banks unable to capitalize on this: • Investor sentiment: Commission income down as investors remain reluctant to trade • On-balance sheet: Deposits rising as investors – and banks – move to on-balance sheet products and funding; compensates for margin pressure despite lower new loan production • Risk management: Focus area, mixed picture, with some banks reducing and others increasing on a year-on-year basis; the overall picture is a continuation from 2011 • Cost management: Claims of ‘strict cost control’, ‘IT cost reductions’, or ‘rapid improvement of cost efficiency’ – truth is more demure: Cost just contained or even increase, leading to worsening cost-to-income ratios■ Outlook characterized by uncertainty, recapitalization and bank restructuringBuilding resilient models: In light of higher risk levels, capital requirements,client reticence, more efforts to overhaul delivery and service models expectedSource: 2012 Q1 segment reports, A.T. Kearney analyis A.T. Kearney xx/mm.yyyy/00000 11
  • Outlook: Cost and service model transformation of the retailbank■ Operational excellence: Cost-income ratio differences significant, banks to work all levers across structure, process, IT leverage, smart sourcing and skill & capacity management■ Complexity management: Getting rid of legacy burden from products across sales structures to processes and IT; potential of 30-35 percent reduction of products/features, IT cost savings■ Pricing realization: Structural and cultural change in (1) services provided free of charge, (2) free basis (current account) services, and (3) undercharging/hidden rebates/special conditions■ Service innovation: Leverage “frequency” generated by transactions to provide paid services on top; leveraging large customer bases to innovate, dare to trial and error■ Service excellence: Focus on ‘better’ rather than on new customers, driving service intensity to treasured customers in systematic way (vs. intuitive relationship manager-driven)■ Multichannel-centric banking: New delivery models and new role for branch within multichannel mix, enabled by data storage, analytics, communication and device evolutionSource:, A.T. Kearney A.T. Kearney xx/mm.yyyy/00000 12
  • A.T. Kearney is a global team of forward-thinking, collaborative partners that delivers immediate, meaningfulresults and long-term transformative advantage to clients.Since 1926, we have been trusted advisors on CEO-agenda issues to the world’s leading organizations acrossall major industries and sectors. A.T. Kearney’s offices are located in major business centers in 39 countries.Americas Atlanta Chicago Detroit Mexico City San Francisco Toronto Calgary Dallas Houston New York São Paulo Washington, D.C.Asia Pacific Bangkok Hong Kong Kuala Lumpur Mumbai Seoul Singapore Tokyo Beijing Jakarta Melbourne New Delhi Shanghai SydneyEurope Amsterdam Budapest Helsinki Ljubljana Moscow Prague Vienna Berlin Copenhagen Istanbul London Munich Rome Warsaw Brussels Düsseldorf Kiev Madrid Oslo Stockholm Zurich Bucharest Frankfurt Lisbon Milan Paris StuttgartMiddle East Abu Dhabi Johannesburg Riyadhand Africa Dubai Manama A.T. Kearney xx/mm.yyyy/00000 13