European Banking Forum 20041
The Future of
European Retail Banking
Frank Schwab
Friday, 5th March 2004
European Banking Fo...
European Banking Forum 20042
The future of European retail banking
Where we are ?2.
Where do we go to ?3.
Where do we come...
European Banking Forum 20043
1980 -2000: Europe’s universal bank system
è  European private banks focussed on investment
b...
European Banking Forum 20044
1995 - 2000: The hype of e-commerce & online
banking
Customer
Traditional Retail Banking
Atta...
European Banking Forum 20045
The future of European retail banking
Where we are ?2.
Where do we go to ?3.
Where do we come...
European Banking Forum 20046
Branch and bank density (2002)
è  The UK banking market is the most consolidated,
followed by...
European Banking Forum 20047
Cost/Income Ratios (Average 1992-2001)
è  The UK banking market is the most profitable,
follo...
European Banking Forum 20048
Average = 4.3
0
5
15
4550556065707580
BNP
ING
Barclays
Lloyds
Crédit Suisse
UBS
Citibank
UniC...
European Banking Forum 20049
Value creation of different industries
50 % 50 %
30 % 70 %
80 % 20 %
20 % 80 %
Banking
indust...
European Banking Forum 200410
The future of European retail banking
Where we are ?2.
Where do we go to ?3.
Where do we com...
European Banking Forum 200411
Disintegration of the traditional banking value
chain
è  Specialisation and development of c...
European Banking Forum 200412
German age structure: half of the population is
older than 50 years in 2050
è Germany is a f...
European Banking Forum 200413
Financial wealth per capita of European citizens
increases on a high level
è There is a cont...
European Banking Forum 200414
Scenario 1: Set single focus on older people
n targets customers older than 55
years
n focus...
European Banking Forum 200415
IT spend matters ...
è Some of the most successful European retail banks
have a high IT spen...
European Banking Forum 200416
visibility/publicity
lowhigh
maturity
low high
è No single mega trend, but many parallel tre...
European Banking Forum 200417
European union: eastern enlargement
1 Estonia
2 Latvia
3 Lithuania
4 Poland
5 Czech Republic...
European Banking Forum 200418
Scenario 2: Serve the “not banked” customer
“Small loan terminal”
n targets “non bank” custo...
European Banking Forum 200419
Whatever strategy you choose ...
... be excellent !
Excel your customers’ expectation
Excel ...
European Banking Forum 200420
Thank you !
Let’ s discover our individual
Futures of the European Retail Banking
and discus...
European Banking Forum 200421
Frank@FrankSchwab.de
Do you want to hear me speak ?
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Future Of Banking E B F 2004 Final

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Keynote: "The Future of Banking" @ European Banking Forum 2004 by Frank Schwab

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Future Of Banking E B F 2004 Final

  1. 1. European Banking Forum 20041 The Future of European Retail Banking Frank Schwab Friday, 5th March 2004 European Banking Forum
  2. 2. European Banking Forum 20042 The future of European retail banking Where we are ?2. Where do we go to ?3. Where do we come from ?1.
  3. 3. European Banking Forum 20043 1980 -2000: Europe’s universal bank system è  European private banks focussed on investment banking. Retail banking was largely neglected 0 1,000 2,000 3,000 4,000 5,000 6,000 Dec91 Dec92 Dec93 Dec94 Dec95 Dec96 Dec97 Dec98 Dec99 Dec00 Dec01 Dec02 Dec03 DJ EuroStoxx50 0 500 1,000 1,500 2,000 Domestic Cross border Mergers & Acquisitions Source: OECD n Trading & Sales n Mergers & Acquisitions n IPO’s
  4. 4. European Banking Forum 20044 1995 - 2000: The hype of e-commerce & online banking Customer Traditional Retail Banking Attacker è  The bubble did burst, but additional competition for traditional retail banks is left and margins decreased
  5. 5. European Banking Forum 20045 The future of European retail banking Where we are ?2. Where do we go to ?3. Where do we come from ?1.
  6. 6. European Banking Forum 20046 Branch and bank density (2002) è  The UK banking market is the most consolidated, followed by Spain. Branch density per 1,000 inhabitants Bank density per 100,000 inhabitants UK Spain Italy Germany France Average Source: DB Research 0.21 0.64 0.95 0.67 0.52 1.43 0.46 3.14 0.44 1.70 0.52 1.52 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 No of inhabitants No of banks UK Branch 4,762 UK Bank 156,250 445 ES Branch 1,053 ES Bank 149,254 349 I Branch 1,923 I Bank 69,930 808 D Branch 2,174 D Bank 31,847 2,232 F Branch 2,273 F Bank 58,824 952 AVG Branch 2,437 AVG Bank 93,221 957
  7. 7. European Banking Forum 20047 Cost/Income Ratios (Average 1992-2001) è  The UK banking market is the most profitable, followed by Spain. 60.4 60.7 63.1 64.3 67.1 63.1 58 59 60 61 62 63 64 65 66 67 68 UK Spain Italy Germany France Average CIR in % Source: DB Research
  8. 8. European Banking Forum 20048 Average = 4.3 0 5 15 4550556065707580 BNP ING Barclays Lloyds Crédit Suisse UBS Citibank UniCredito Raiffeisenb. Banca Fideuram Average = 63.4 Citibank PC MLP (42% growth) Coba (85) ABN Amro HSBC SEB Banco Popular Dreba (-1) HVB 10 DB PBC Income growth and cost/income ratio of retail banks across Europe, 1998 - 2001 Sources: Annual reports; McKinsey analysis C/I ratio 98-01 in % Income growth 98-01 in % è  Financially successful retail banks can be characterised by low cost/income ratios and high income growth
  9. 9. European Banking Forum 20049 Value creation of different industries 50 % 50 % 30 % 70 % 80 % 20 % 20 % 80 % Banking industry Capital goods industry Automotive industry Electrical industry Internal labour External labour Sources: DZ-Bank, CSFB, Roland Berger, 2002 è  Compared to other industries, banks still have a high internal labour rate
  10. 10. European Banking Forum 200410 The future of European retail banking Where we are ?2. Where do we go to ?3. Where do we come from ?1.
  11. 11. European Banking Forum 200411 Disintegration of the traditional banking value chain è  Specialisation and development of core competencies can be a key for success in retail banking Traditional Trend Scoring Business Dev. Product Dev. Processing HR Customer segmentation Marketing Sales Online
  12. 12. European Banking Forum 200412 German age structure: half of the population is older than 50 years in 2050 è Germany is a front-runner of a dramatic structural change of the European age structure 1950 WomenMen 2050 WomenMen Source: German Federal Statistical Office
  13. 13. European Banking Forum 200413 Financial wealth per capita of European citizens increases on a high level è There is a continuous increasing demand of investment and asset management products Source: Organisation for Economic Co-operation and Development 48 47 31 30 33 16 34 77 66 47 47 44 29 52 0 10 20 30 40 50 60 70 80 90 1995 2000 ‘000 Euro 9,0 9,9 7,0 9,1 9,6 6,0 12,6 CAGR
  14. 14. European Banking Forum 200414 Scenario 1: Set single focus on older people n targets customers older than 55 years n focus on Central Europe n coverage of the full product range, customised for this special period of life n building partnerships with relevant organisations and networks like “http://www.age-platform.org” è Older people as the only target group of a retail bank with focus on Central Europe
  15. 15. European Banking Forum 200415 IT spend matters ... è Some of the most successful European retail banks have a high IT spend level ITcost/operatingcosts 10% 15% 20% 25% 5% Cost / income ratio 20% 40% 60% 80% 100% DB PBC 2001 2002 Median Median Citibank PC Unicredito Barclays Lloyds CS UBS Dresdner Bank HVB BNP ParibaHSBC SCH BBVA
  16. 16. European Banking Forum 200416 visibility/publicity lowhigh maturity low high è No single mega trend, but many parallel trends increase the need for tight alignment of IT and business strategy Mobile Services Web Services CRM Electronic signature IT Infrastructure Outsourcing BPO Outsourcing LINUX “Farms” & “Blades” replacement of OS/2 network bandwidth Private & Business Clients – Rahmenbedingungen zur Strategieentwicklung... and information technology can be a source of competitive advantage Offshore Application Outsourcing Business intelligence
  17. 17. European Banking Forum 200417 European union: eastern enlargement 1 Estonia 2 Latvia 3 Lithuania 4 Poland 5 Czech Republic 6 Slovakia 7 Hungary 8 Slovenia 9 Romania (2007) 10 Bulgaria (2007) 11 Malta 12 Cyprus 13 Turkey (open) è Increase of existing European market by 75 million inhabitants to 375 million customer on 1st of May 2004
  18. 18. European Banking Forum 200418 Scenario 2: Serve the “not banked” customer “Small loan terminal” n targets “non bank” customer in Eastern Europe n small loans up to 500 Euro n above average interest rate n placed at supermarkets, retailers, malls n online authentication by phone number, social security number, address, date of birth, ... n online scoring n instant loan, paid cash and cash pay back “Small loan” terminal è “Small loan terminal” as the single business activity of a specialised retail bank in the Eastern Europe market
  19. 19. European Banking Forum 200419 Whatever strategy you choose ... ... be excellent ! Excel your customers’ expectation Excel in training and motivating your employees Excel the quality of your processes è Excellence in these three dimension leads to sustainable financial success
  20. 20. European Banking Forum 200420 Thank you ! Let’ s discover our individual Futures of the European Retail Banking and discuss possible co-operations & solutions in the sessions of the next two days.
  21. 21. European Banking Forum 200421 Frank@FrankSchwab.de Do you want to hear me speak ?

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