european banking barometer – 2016: seeking stability in an uncertain world
TRANSCRIPT
European Banking Barometer – 2016 Seeking stability in an uncertain world
European Banking Barometer – 2016 2
What’s inside
43Headcount and compensation
03Introduction
14Business outlook and focus areas
29Strategic priorities and restructuring
52Outlook by market
57Contacts
European Banking Barometer – 2016 3
Section 1
Introduction
4
Introduction
The European Banking Barometer provides an overview of the macroeconomic outlook and its impact on the European banking industry, as well as the priorities banks will focus on over the next 12 months.
Now in its seventh edition, the survey consists of 250 interviews with senior bankers across 12 markets: Austria, Belgium, France, Germany, Ireland*, Italy, the Netherlands, the Nordics, Poland, Spain, Switzerland and the UK.
The fieldwork was conducted via an online questionnaire and telephone interviews during November and December 2015. Respondents were interviewed from a range of financial institutions covering at least 50%** of banking assets in each market. A range of bank types were interviewed in each market to help ensure the study was a fair reflection of each country’s banking industry. Interviews were not conducted with subsidiaries of member or group banks.
The results in this report are presented in an aggregate market format and shown in percentages. Aggregated European-wide results have been weighted in proportion to countries’ banking assets. All country-level data is unweighted.
Please note that some charts may not add up to 100%, and net totals may differ slightly from the numbers shown in the charts, as percentages have been rounded to the nearest whole number. Where possible, we have compared and contrasted the data with that in our European Banking Barometer – 2015.
We would like to thank all the research participants for their contributions to the study.
If you would like to take part in our next European Banking Barometer study, please speak to your usual EY contact or refer to your local country contact on page 58.
European Banking Barometer – 2016European Banking Barometer – 2016 is based on respondents' 12-month outlook.* Ireland has been added to the study as a new market for 2016.** France represents 41% and the Nordics represent 49% of their markets’ banking assets.
European Banking Barometer – 2016 5
Introduction
20
9
11
16
44
Universal (large-scale banking group or major bank)
Corporate and investment
Private bank or wealth manager
Specialist (e.g., consumer credit, savings or a bank that doesn’t offer a current account)
Retail and business (SME business banking)
* Numbers in the pie chart reflect the percentage of respondents who answered. Percentages were calculated using unweighted data. Please note that, given the structure of the German and Swiss banking markets, respondents in these two countries were provided with country-specific bank types that have been reallocated to our five European bank types as follows: In Germany, big banks and regional banks were reallocated to universal banks; foreign banks (not headquartered in Germany) were reallocated to corporate and investment banks; private bankers were reallocated to private banks or wealth management; savings banks and cooperative banks were reallocated to retail and business banks; and central building societies, building loan associations and mortgage banks were reallocated to specialist banks. In Switzerland, major banks were reallocated to universal banks; investment banks were reallocated to corporate and investment banks; private bankers (general or limited partnership) and banks under foreign control were reallocated to private banks/wealth management; cantonal banks, and regional and savings banks were reallocated to retail and business banks; and securities traders were reallocated to specialist banks.
Composite of the survey sample by bank type
Bank type*
European Banking Barometer – 2016 6
Introduction
Market Total Universal Corporate and
investment
Private bank or wealth
management Specialist
Retail and business
(cooperative)
Retail and business (state
owned)
Retail and business
(privately owned)
Austria 10 4 2 1 1 2
Belgium 11 4 1 1 1 4
France 14 5 1 1 3 1 1 2
Germany 72 3 3 8 12 12 32 2
Ireland** 21 4 2 3 9 3
Italy 33 7 3 4 2 7 2 8
Netherlands 9 4 5
Nordics 14 5 1 1 4 1 2
Poland 12 2 10
Spain 9 5 1 1 2
Switzerland 11 2 4 2 3
UK 34 6 12 5 3 2 6
Europe*** 250 49 23 28 40 25 44 41
* Given the structure of the German and Swiss banking markets, respondents in these two countries were provided with country-specific bank types that have been reallocated to our five European bank types as follows: In Germany, big banks and regional banks were reallocated to universal banks; foreign banks (not headquartered in Germany) were reallocated to corporate and investment banks; private bankers were reallocated to private banks or wealth management; savings banks and cooperative banks were reallocated to retail and business banks; and central building societies, building loan associations and mortgage banks were reallocated to specialist banks. In Switzerland, major banks were reallocated to universal banks; investment banks were reallocated to corporate and investment banks; private bankers (general or limited partnership) and banks under foreign control were reallocated to private banks or wealth management; cantonal banks and regional and savings banks were reallocated to retail and business banks; and securities traders were reallocated to specialist banks.** Ireland has been added as a new market to the study for 2016.*** European totals in the table reflect the unweighted number of respondents who answered. All European aggregated percentages in the report are weighted in proportion to markets’ banking assets, as reported by The Banker database in June 2015 and SNL Financial. All market-level figures in this report reflect unweighted data.
Composite of the survey sample by bank type
Bank type*
European Banking Barometer – 2016 7
European overviewEuropean overview
European banks reposition for a long-term environment of regulatory-driven change and low growth.► The broad-based optimism of European bankers in our recent
surveys has evaporated. Although many expect the outlook for individual business lines to improve, limited improvement in financial performance is anticipated. This overall picture masks a sharp divide across European Markets.
► Most bankers expect their agenda for the next 12 months to be dominated by risk management and regulatory compliance.
► With economic conditions a major obstacle to revenue growth, many respondents also anticipate a renewed focus on cost reduction, including further job cuts.
► Where institutions do seek growth, it is likely to be through partnerships or joint ventures rather than acquisitions.
Overall optimism slips to its lowest level since 2012 …► Bank executives are at their least optimistic about their financial
performance since 2012, when the Eurozone debt crisis was at its height.
► Expectations for revenue growth, cost reduction and return on equity (ROE) are also down from last year.
► Unless banks exceed the 1.62% revenue growth and 0.90% reduction in costs they anticipate, we estimate they will only see improvement in average ROE of 0.47% – less than half of the average 1.06% anticipated by the respondents.
► However, expectations of performance are sharply divided across different markets. For example, in Ireland, Spain and the UK, bankers expect ROE to increase by about 2.5%, while the expectation in Poland is for a 3% decline.
Financial performanceFinancial performance expectations are less optimistic: only 52% of respondents believe that the financial performance of their own bank will improve, compared with 56% in 2015. The net positive score – the gap between those expecting their financial performance to strengthen and those expecting it to weaken – has fallen to 29%, the lowest since 13% was recorded in 2012.
29%
View the European overview video at ey.com/ebb
European Banking Barometer – 2016 8
European overview
Risk at top of agendaRisk management remains top priority: over the years since we launched the European Banking Barometer, managing risk and regulation has consistently dominated banks’ list of priorities – underlining the extent to which it has simply become part of business-as-usual. As with last year, risk management ranks as the No.1 agenda item this time, cited as a priority by 70% of respondents.
… but there is more optimism about the outlook for individual business lines …► While bankers have been optimistic for some time about the
outlook for areas such as private banking and wealth management, there’s a marked pickup this year in their expectations for investment banking and transaction advisory services. This points to a bright outlook for M&A, reflecting the impact on some industries from factors such as the recent market turbulence and plunging oil prices.
… and a broad loosening of lending policies in both the corporate and consumer sectors. ► While this may again appear surprising, given the relatively high
level of market uncertainty, it reflects the fact that banks across Europe are generally in a better capital position than they have been for some time. It seems that, with stronger common equity Tier 1 (CET1) capital ratios – up by an average of 70bps from last year – and impact of the European Central Bank’s quantitative easing program, banks are feeling more freedom to lend.
Risk and regulation continue to dominate the agenda …► Risk management remains the No.1 agenda item for banks, with
other risk and regulation issues, such as capital ratios and compliance with capital market regulations, also still ranking highly.
► Cybersecurity and combating finance crime will remain a key priority for banks in Belgium, France, Ireland, Netherlands, Poland and UK.
… together with efficiency.► Bankers anticipate an increased emphasis on cost reduction – and
not just the strategic kind, but short-term cost cutting as well. ► Streamlining processes is now a key priority for 61% of banks, up
from 57% last year. Perhaps more significant is the increased emphasis on minimizing all non-essential expenditure/cutting costs, a priority for more than half of respondents, compared with just 37% in 2015.
70%
View the European overview video at ey.com/ebb
European Banking Barometer – 2016 9
European overview
Headcount reductionHeadcount is expected to fall: fifty-four percent of bankers expect headcount to fall in 2016, compared with 43% in our last survey, with reductions, once again, predicted in operations and IT, other head-office functions and retail banking. Ireland, the Nordics and Switzerland are the only markets where more respondents expect overall headcount to increase rather than decrease.
Expectations for job cuts and pay highlight the renewed emphasis on cost reduction …► Our findings suggest that headcount reduction is likely to be at its
highest rate since 2012, with 54% of respondents predicting it will fall, compared with 43% last year.
► However, in contrast to 2015, most markets anticipate an increase in headcount in compliance, risk and finance, reflecting the prioritization of risk management and regulatory compliance across the industry.
► Bankers also anticipate ongoing moderation of pay. Although 22% of bankers still anticipate a rise in aggregate pay in 2016 – the same number as in 2015 – just 12% anticipate a rise greater than 2%, compared with 17% last year. More significantly, 60% of bankers expect aggregate pay to remain flat in 2016.
… as banks turn to innovation and partnerships to drive growth.► Our findings also underline the rapidly growing focus on investing
in customer-facing technology – which will be central to winning market share and share of wallet – with 53% of banks citing this as a priority, up from 43% last year.
► With many banks preoccupied by regulatory compliance and challenged by budget cuts, partnerships with FinTech firms may play a key role in developing new technologies to support their growth agenda as partnerships with industry disruptors was cited as a key priority by 23% of respondents.
Finally, a new agenda item for banks might be preparing for the impact of the UK leaving the EU.► With the UK’s referendum on EU membership scheduled for June
2016, 70% of all European banks anticipate some impact from a UK departure. More importantly, 27% of banks in EU countries outside the UK say the impact would be “considerable” or “significant.”
54%
View the European overview video at ey.com/ebb
European Banking Barometer – 2016 10
Highlights
How do you expect your bank’s overall financial performance to change over the next 12 months?
Overall optimism of senior banking executives slips to its lowest since 2012 …
Despite falling ROE expectations, bankers continue to have ambitious predictions:
13 48 462012 2013 2014 2015 2016
% % % 40 29% %
* Net increase
1.6%
0.9%
1.1%
Revenue
Cost base
ROE uplift
0.5%
Half of what the banks anticipate
EY analysis predicts banks will only achieve 0.5% ROE uplift based on bankers’ revenue
and cost predictions.
Average ROE
* Difference between the respondents who answered it would strengthen and those who answered it would weaken.
Bankers’ expectations for 2016 EY’s expectations
European Banking Barometer – 2016 11
Highlights
How do you rate the outlook for your bank over the next 12 months?
… but the prognosis is brighter for specific business lines.
* Not good
57% 52% 46% 42%
Private banking / wealth management
Corporatebanking
Retailbanking
Transaction advisory,e.g., M&A
* Difference between the respondents who answered it would be poor and those who answered it would be good.
European Banking Barometer – 2016 12
Highlights
European bankers’ top three priorities for 2016:
Risk and regulation – together with cost cutting – dominate the agenda.
Minimizing all non-essential expenditure/cutting costs
Investing in customer-facing technology
Cybersecurity/data security
Reputational risk**
Compliance with capital market regulations
Capital, liquidity and the leverage ratio
Streamlining processes/further automation/investing in technology
Risk management
51
53
56
58
58
60
61
70
Banks’ top agenda items*
Risk andregulation
Cost cutting and efficiency
Innovation and growth
* Percentage of respondents ranking agenda items as very important** Reputational risk includes tax transparency, remuneration and cultural issues..
In 2015 compared with
Strong focus on cost cutting:
43%
in 2016 predict headcount to fall, which is at its highest rate since 2012.
54%
European Banking Barometer – 2016 13
Highlights
FinTech collaboration will enable banks to innovate and grow.
23% 53%Expect to collaborate with FinTech companies …
… banks looking to invest in customer-facing technology …
… which is critical to the …
… and respond to the growing emphasis on enhancing cyber security.
47In 2014
% 48In 2015
% 56In 2016
%
European Banking Barometer – 2016 14
Section 2
Business outlookand focus areas
European Banking Barometer – 2016 15
Business outlook and focus areas
* Numbers reflect the percentage of respondents who answered. Base excludes respondents who answered “Don’t know.”
2 21 25 44 8
1 15 27 48 8
Weaken significantly Weaken slightly Stay the same Strengthen slightly Strengthen significantly
2016
2015
Comments: Only in our 2012 survey, in the midst of the Eurozone debt crisis, have bankers been less optimistic about their institution’s financial performance. Across Europe, banks anticipate an improvement in revenue of just 1.6%, which is well below last year’s rather modest 3.5% prediction. Similarly, bankers expect costs to fall by an average of 0.9%, well below the 1.6% they anticipated last year. Although respondents hope that these improvements will deliver an average increase of 1.1% in ROE (also down from 1.6% last year), EY analysis suggests that the anticipated revenue growth and cost reduction will boost ROE by a mere 0.5%. However, despite a general decline in confidence, expectations are sharply divided across Europe. The outlook is bleakest in Poland, where bankers anticipate a 3.3% decline in ROE as they grapple with regulatory change and higher operating costs. Banks in Germany and the Nordics also anticipate a slight decline in ROE. By contrast, bankers in Ireland, Spain and the UK expect ROE increases in excess of 2.5%.
How do you expect your bank’s financial performance to change over the next 12 months?*
Bankers are less optimistic about their institution’s financial performance than at any time in the last four years …
European Banking Barometer – 2016 16
Business outlook and focus areas
* Numbers reflect the percentage of respondents who answered. Base excludes respondents who answered “Don’t know.”
Revenue
Average percentage change
1.17
2.45
1.62
1.96
1.04
6.28
2.13
1.81
1.50
3.59
0.83
1.09
1.59
Cost base
-1.90
-2.05
-0.90
-0.58
0.52
0.14
-0.72
-2.19
-1.07
2.55
-4.56
0.82
-1.25
ROE
0.40
0.18
1.06
0.79
-0.17
2.80
1.76
0.50
-0.61
-3.33
2.56
0.91
2.66UK
Switzerland
Spain
Poland
Nordics
Netherlands
Italy
Ireland
Germany
France
Europe
Belgium
Austria
-6.50 -5.50 -4.50 -3.50 -2.50 -1.50 -0.50 0.50 1.50 2.50 3.50 4.50 5.50 6.50
Increase
1.17-1.90 0.40
Decrease significantly Increase significantly
Percentage increase
Stay the same
2.45-2.05 0.18
1.62-0.90 1.06
1.96-0.58 0.79
1.040.52-0.17
6.280.14 2.80
2.13-0.72 1.76
1.81-2.19 0.50
1.50-1.07 -0.61
3.592.55-3.33
0.83-4.56 2.56
1.090.82 0.91
1.59-1.25 2.66
How do you expect your bank’s financial performance to change over the next 12 months?*
… with only Irish, Spanish and UK banks expecting ROE growth of over 2.5%.
European Banking Barometer – 2016 17
33
42
40
43
43
47
51
52
50
10
4
7
8
7
5
5
7
13
13
11
10
9
9
10
9
7
5
1
2
2
4
1
1
1
Business outlook and focus areas
Base excludes respondents answering “Does not apply” or who chose not to answer.* Numbers reflect the percentage of respondents who answered. Respondents answering “Neither good nor poor” are not displayed.1. EY’s Capital Confidence Barometer can be downloaded at ey.com/ccb.
Deposit business
Securities trading
Asset management
Debt and equity issuance
Securities services
Transaction advisory (e.g., M&A)
Retail banking
Corporate banking
Private banking and wealth management
38
27
37
43
38
37
41
53
53
5
5
8
11
6
6
14
5
9
17
18
13
9
14
17
12
6
7
2
2
2
4
1
2
1
1
Net good
57
52
46
42
41
38
36
33
29
Net good20162015
54
51
44
24
29
40
30
13
25
Very goodFairly goodVery poor Fairly poor
Comments: While bankers continue to believe the outlook is most positive for “capital-light” private banking and wealth management, as well as corporate banking, the most dramatic improvement in outlook since last year is for capital market-related businesses. Notably, more than half of respondents believe the outlook for transaction advisory services is good. This reflects the results of EY’s latest Global Capital Confidence Barometer,1 which predicts increased M&A spending in several sectors, including construction, gaming, pharmaceuticals, capital goods and telecommunications. Weak oil prices and low company valuations may also create opportunities for transactions in the oil and gas industry. Only the outlook for debt and equity issuance is slightly less positive than in 2015, reflecting uncertainty about the prospects for economic growth in European and other major global markets.
How do you rate the outlook for your bank over the next 12 months in each of the following business lines?*
Nevertheless, bankers remain upbeat about the outlook for individual lines of business …
European Banking Barometer – 2016 18
Business outlook and focus areas
Base excludes respondents answering “Does not apply” or who chose not to answer.* Numbers reflect the percentage of respondents who answered. Respondents answering “Neither good nor poor” are not displayed.
UKSwitzerland
SpainPoland
NordicsNetherlands
ItalyIreland
GermanyFranceEurope
BelgiumAustria
3545
3860
4360
5750
635050
7344
818
131043
1430
917
13
22
129
14
1120
2
5
-3.846154
-0.758471
Very goodFairly goodVery poor Fairly poor
UKSwitzerland
SpainPoland
NordicsNetherlands
ItalyIreland
GermanyFranceEurope
BelgiumAustria
5264
4458
45100
60424445
5267
50
16
11.11111125
3.33333316.666667
3.1259.090909
6.925289
-8
-9.090909
-13.333333-8.333333
-7.8125-9.090909
-6.86993999999999
-12.5
2
UKSwitzerland
SpainPoland
NordicsNetherlands
ItalyIreland
GermanyFranceEurope
BelgiumAustria
5740
5050
5640
6250
3955
5163
44
9.52381
2511.111111
3.44827620
3.030303
4.92053425
22.222222
520
13
10
999
22
-10-1.515152
UKSwitzerland
SpainPoland
NordicsNetherlands
ItalyIreland
GermanyFranceEurope
BelgiumAustria
4857
4340
3367
4733
1960
4733
80
414
5
510
5
-13.043478
-42.857143-20
-10.526316
-8.108108
-10.134555-33.333333
-20
-5.26315799999999
-11.111111
-0.553562
Private banking and wealth management Corporate banking
Retail banking Transaction advisory (e.g., M&A)
How do you rate the outlook for your bank over the next 12 months in each of the following business lines?*
… with a significant improvement in the outlook for transaction advisory and …
European Banking Barometer – 2016 19
UKSwitzerland
SpainPoland
NordicsNetherlands
ItalyIreland
GermanyFranceEurope
BelgiumAustria
4027
4440
29
3555
6155
4330
70
5
388
97
97
518
1110
254
499
2010
-5
-1
Business outlook and focus areas
Base excludes respondents answering “Does not apply” or who chose not to answer.* Numbers reflect the percentage of respondents who answered. Respondents answering “Neither good nor poor” are not displayed.
Very goodFairly goodVery poor Fairly poor
UKSwitzerland
SpainPoland
NordicsNetherlands
ItalyIreland
GermanyFranceEurope
BelgiumAustria
7514
5040
4580
3636
3127
431413
8.333333
1018.181818
89.090909
18.1818187.966875
414
1018
129
1199
2925
429
497
4
UKSwitzerland
SpainPoland
NordicsNetherlands
ItalyIreland
GermanyFranceEurope
BelgiumAustria
3336
504043
2241
5840
4540
6050
4
1310
1422
1025
9
710
1327
101411108
39
1010
-8
3
-2
UKSwitzerland
SpainPoland
NordicsNetherlands
ItalyIreland
GermanyFranceEurope
BelgiumAustria
3545
5017
4433
4060
3955
42
44
4
811
49
4
2318
3311
1717
5
1114
22
-4
-17
-2
Securities services Debt and equity issuance
Asset management Securities trading
How do you rate the outlook for your bank over the next 12 months in each of the following business lines?*
… securities services and securities trading. However, the outlook for debt and equity issuance is slightly less positive than last year …
European Banking Barometer – 2016 20
UKSwitzerland
SpainPoland
NordicsNetherlands
ItalyIreland
GermanyFranceEurope
BelgiumAustria
2810
4467
5050
4230
3833
6410
2110
1117
133
254
810
1820
-17
-33
-33-13
-23-8
-13
-13
3
3
-1
-1
Business outlook and focus areas
Base excludes respondents answering “Does not apply” or who chose not to answer.* Numbers reflect the percentage of respondents who answered. Respondents answering “Neither good nor poor” are not displayed.
Very goodFairly goodVery poor Fairly poor
Deposit business
How do you rate the outlook for your bank over the next 12 months in each of the following business lines?*
… reflecting broad economic uncertainty and concerns about valuations in a volatile market.
European Banking Barometer – 2016 21
41 33 32
22 21
9 13
7 13
7 4
11
2523242827263130
3837
4349
Business outlook and focus areas
Base excludes respondents who answered “Don’t know.”* Numbers reflect the percentage of respondents who answered. Respondents answering “Remain unchanged” are not displayed. ** Manufacturing and industrials includes chemicals, engineering, infrastructure and materials; Health care includes pharmaceuticals, biotechnology and life sciences; transport includes automotive and shipping.2. https://www.eba.europa.eu/-/eba-recommends-introducing-the-nsfr-in-the-eu.
Energy, mining and minerals
Construction
Commercial real estate
Financial services
Transport**
Media and telecommunications
Retail and consumer products
Commercial and professional services
Manufacturing and industrials**
IT
Health care**
SMEs
24 33
38 27 23 17 19
11 17 11
17 18
3019181921
312529
403944
52
20162015Net less
restrictiveNet less
restrictive
3939302523171766-7-10-16
3428282418613-2-8
-21-146
How do you expect the corporate lending policies of banks in your market to change in each of the following sectors over the next 12 months?*
Banks expect policies for lending to most sectors to be less restrictive, aided by stronger capital positions and ongoing monetary easing …
Comments: Bankers continue to expect corporate lending policies to become less restrictive across most sectors. This expectation supports the European Banking Authority’s (EBA) recent assertion that there is no strong statistical evidence of significant negative impacts of the net stable funding ratio (NSFR) on bank lending. 2 With stronger capital positions – average Tier 1 (CET 1) common equity for European banks has increased by 70bps over the last 12 months – competitive pressure and narrower margins on loans may spur further loosening of lending criteria, as some banks seek to compensate for tighter margins by growing their lending book. However, as banks continue to de-risk their balance sheets, lending policies for the commercial real estate and construction sectors will continue to tighten. In addition, lending criteria for the energy sector is expected to become more restrictive, as firms in that sector continue to suffer from the continued depression of oil prices.
■ More restrictive ■ Less restrictive
European Banking Barometer – 2016 22
Energy, mining and mineralsConstruction
Commercial real estateFinancial services
Transport**Media and telecommunicationsRetail and consumer products
Commercial and professional servicesManufacturing and industrials**
ITHealth care**
SMEs
2525
1325
2525
382525
5038
38
631413
1313
Business outlook and focus areas
Base excludes respondents who answered “Don’t know.”* Numbers reflect the percentage of respondents who answered. Respondents answering “Remain unchanged” are not displayed.** Manufacturing and industrials includes chemicals, engineering, infrastructure and materials; Health care includes pharmaceuticals, biotechnology and life sciences; transport includes automotive and shipping.
Austria
Energy, mining and mineralsConstruction
Commercial real estateFinancial services
Transport**Media and telecommunicationsRetail and consumer products
Commercial and professional servicesManufacturing and industrials**
ITHealth care**
SMEs
201414
2933
1414
3317
5729
57
6043
2929
3314
2933
5014
2929
Belgium
Energy, mining and mineralsConstruction
Commercial real estateFinancial services
Transport**Media and telecommunicationsRetail and consumer products
Commercial and professional servicesManufacturing and industrials**
ITHealth care**
SMEs
1626
346
202424
3036
244650
2016
2636
224
6
614
26
Energy, mining and mineralsConstruction
Commercial real estateFinancial services
Transport**Media and telecommunicationsRetail and consumer products
Commercial and professional servicesManufacturing and industrials**
ITHealth care**
SMEs
4325
3825
3814
2538
2538
5063
38131313
13
13
However, lending policies to the energy sector are set to be more restrictive in all markets except France and Italy …How do you expect the corporate lending policies of banks in your market to change in each of the following sectors over the next 12 months?*
France Germany
■ More restrictive ■ Less restrictive
European Banking Barometer – 2016 23
Business outlook and focus areas
Energy, mining and mineralsConstruction
Commercial real estateFinancial services
Transport**Media and telecommunicationsRetail and consumer products
Commercial and professional servicesManufacturing and industrials**
ITHealth care**
SMEs
5521
1348
3943
6341
7057
7579
950
589
13
45
134
Energy, mining and mineralsConstruction
Commercial real estateFinancial services
Transport**Media and telecommunicationsRetail and consumer products
Commercial and professional servicesManufacturing and industrials**
ITHealth care**
SMEs
25252525252525
2525
50
25
25
Energy, mining and mineralsConstruction
Commercial real estateFinancial services
Transport**Media and telecommunicationsRetail and consumer products
Commercial and professional servicesManufacturing and industrials**
ITHealth care**
SMEs
208080
5033
1760
40333333
67
4020
1717
33
1717
Energy, mining and mineralsConstruction
Commercial real estateFinancial services
Transport**Media and telecommunicationsRetail and consumer products
Commercial and professional servicesManufacturing and industrials**
ITHealth care**
SMEs
715757
4343
17434343
1414
43
17
2929
1429
… while lending to commercial real estate and construction are expected to tighten in most markets …How do you expect the corporate lending policies of banks in your market to change in each of the following sectors over the next 12 months?*
Base excludes respondents who answered “Don’t know.”* Numbers reflect the percentage of respondents who answered. Respondents answering “Remain unchanged” are not displayed.** Manufacturing and industrials includes chemicals, engineering, infrastructure and materials; Health care includes pharmaceuticals, biotechnology and life sciences; transport includes automotive and shipping.
Ireland Italy
Netherlands Nordics
■ More restrictive ■ Less restrictive
European Banking Barometer – 2016 24
Business outlook and focus areas
Energy, mining and mineralsConstruction
Commercial real estateFinancial services
Transport**Media and telecommunicationsRetail and consumer products
Commercial and professional servicesManufacturing and industrials**
ITHealth care**
SMEs
14
1414141414141414
43
4343
5714
2929
1414
Energy, mining and mineralsConstruction
Commercial real estateFinancial services
Transport**Media and telecommunicationsRetail and consumer products
Commercial and professional servicesManufacturing and industrials**
ITHealth care**
SMEs
917
18201817
91818
2758
7325
1445
1036
2518
99
Energy, mining and mineralsConstruction
Commercial real estateFinancial services
Transport**Media and telecommunicationsRetail and consumer products
Commercial and professional servicesManufacturing and industrials**
ITHealth care**
SMEs
5063
3875
6363
8657
100100
6386
381313
13
Energy, mining and mineralsConstruction
Commercial real estateFinancial services
Transport**Media and telecommunicationsRetail and consumer products
Commercial and professional servicesManufacturing and industrials**
ITHealth care**
SMEs
101917
3620
252528
243029
37
524339
2325
1520
1129
55
11
… except Austria, Germany, Ireland and Spain.
Base excludes respondents who answered “Don’t know.”* Numbers reflect the percentage of respondents who answered. Respondents answering “Remain unchanged” are not displayed.** Manufacturing and industrials includes chemicals, engineering, infrastructure and materials; Health care includes pharmaceuticals, biotechnology and life sciences; transport includes automotive and shipping.
Poland Spain
How do you expect the corporate lending policies of banks in your market to change in each of the following sectors over the next 12 months?*
Switzerland UK
■ More restrictive ■ Less restrictive
European Banking Barometer – 2016 25
Business outlook and focus areas
Base excludes respondents who answered “Don’t know.”Numbers reflect the percentage of respondents who answered. Respondents answering “Remain unchanged” are not displayed. * Other forms of unsecured personal credit includes overdrafts and point of sale.** This question was added in 2016, so comparison data for 2015 is unavailable.
Other forms of unsecured personal credit*
Peer-to-peer lending
Mortgage lending
Credit cards
Personal loans
27
14
20
10
15
28
33
42
38
46
2016Net less
restrictive
31
28
21
19
1
Many bankers also anticipate retail and consumer lending to be less restrictive over the next 12 months …How do you expect the retail and consumer lending policies of banks in your market to change in each of the following areas over the next 12 months?**
Comments: Stronger capital positions, and an expectation that central bank rates will remain low, will also enable banks to loosen their criteria for retail and consumer lending. Expectations that mortgage lending policies will be eased, despite the formal introduction of the EU Mortgage Credit Directive in March 2016, reflect a very positive outlook for the European residential and property markets. Lending policies are also expected to be much less restrictive in Ireland and Spain, where recovering economies are supported by low rates and an improving labor market.
■ More restrictive ■ Less restrictive
European Banking Barometer – 2016 26
Business outlook and focus areas
Other forms of unsecured personal credit*
Peer-to-peer lending
Mortgage lending
Credit cards
Personal loans
14
50
63
38
14
Austria Belgium
France Germany
Other forms of unsecured personal credit*
Peer-to-peer lending
Mortgage lending
Credit cards
Personal loans
57
43
25
25
63
14
25
13
Other forms of unsecured personal credit*
Peer-to-peer lending
Mortgage lending
Credit cards
Personal loans
22
20
11
22
38
56
33
44
44
Other forms of unsecured personal credit*
Peer-to-peer lending
Mortgage lending
Credit cards
Personal loans
12
26
50
22
38
34
9
4
12
6
… although lending policies are expected to be more restrictive in Belgium …How do you expect the retail and consumer lending policies of banks in your market to change in each of the following areas over the next 12 months?**
Base excludes respondents who answered “Don’t know.”Numbers reflect the percentage of respondents who answered. Respondents answering “Remain unchanged” are not displayed. * Other forms of unsecured personal credit includes overdrafts and point of sale.** This question was added in 2016, so comparison data for 2015 is unavailable.
■ More restrictive ■ Less restrictive
European Banking Barometer – 2016 27
Other forms of unsecured personal credit*
Peer-to-peer lending
Mortgage lending
Credit cards
Personal loans
57
29
43
57
71
14
29
Business outlook and focus areas
Ireland Italy
Netherlands Nordics
Other forms of unsecured personal credit*
Peer-to-peer lending
Mortgage lending
Credit cards
Personal loans
75
25
50
25
50
25
63
Other forms of unsecured personal credit*
Peer-to-peer lending
Mortgage lending
Credit cards
Personal loans
44
21
77
69
73
16
5
4
8
4
Other forms of unsecured personal credit*
Peer-to-peer lending
Mortgage lending
Credit cards
Personal loans
13
14
13
13
13
38
43
63
13
25
… the Netherlands, the Nordics, Poland and Switzerland.
How do you expect the retail and consumer lending policies of banks in your market to change in each of the following areas over the next 12 months?**
Base excludes respondents who answered “Don’t know.”Numbers reflect the percentage of respondents who answered. Respondents answering “Remain unchanged” are not displayed. * Other forms of unsecured personal credit includes overdrafts and point of sale.** This question was added in 2016, so comparison data for 2015 is unavailable.
■ More restrictive ■ Less restrictive
European Banking Barometer – 2016 28
Other forms of unsecured personal credit*
Peer-to-peer lending
Mortgage lending
Credit cards
Personal loans
17
17
25
33
17
58
17
42
Business outlook and focus areas
Poland Spain
Switzerland UK
Other forms of unsecured personal credit*
Peer-to-peer lending
Mortgage lending
Credit cards
Personal loans
43
25
29
50
43
Other forms of unsecured personal credit*
Peer-to-peer lending
Mortgage lending
Credit cards
Personal loans
57
50
100
86
86
Other forms of unsecured personal credit*
Peer-to-peer lending
Mortgage lending
Credit cards
Personal loans
20
50
41
43
13
27
29
24
21
19
A significant loosening of consumer lending policies is anticipated in Spain.How do you expect the retail and consumer lending policies of banks in your market to change in each of the following areas over the next 12 months?**
Base excludes respondents who answered “Don’t know.”Numbers reflect the percentage of respondents who answered. Respondents answering “Remain unchanged” are not displayed. * Other forms of unsecured personal credit includes overdrafts and point of sale.** This question was added in 2016, so comparison data for 2015 is unavailable.
■ More restrictive ■ Less restrictive
European Banking Barometer – 2016 29
Section 3
Strategic priorities and restructuring
European Banking Barometer – 2016 30
Strategic priorities and restructuring
Base excludes respondents answering “Does not apply.” * Respondents were asked to rank the importance of activities on a scale of 0 to 10, where 0 denotes “Not at all important” and 10 denotes “Very important.” Numbers show the percentage of respondents selecting either 8, 9 or 10. ** Compliance with capital market regulations includes MiFID/EMIR. *** Reputational risk includes tax transparency, remuneration and cultural issues.**** Diversity requirements relating to CRD IV – putting in place a policy to promote diversity on the management board.
2016
Rank order of importance
OutsourcingNew foreign markets/internationalization
Acquiring new assets or businessesOffshoring
Disposing of assets or businessesNew remuneration systems
Establishing new business segmentsDeveloping partnerships with industry disruptors/FinTech companies
Diversity requirements relating to CRD IV****Restructuring the business to comply with regulations
Developing/introducing new productsRestructuring the business to cut costs
Current changes in financial reporting/IFRSOptimize your balance sheetThe threat of financial crime
Compliance with consumer regulation/remediationMinimizing all non-essential expenditure/cutting costs
Investing in customer-facing technologyCybersecurity/data security
Reputational risk***Compliance with capital market regulations**
Capital, liquidity and the leverage ratioStreamlining processes/further automation/investing in technology
Risk management
10.421345
12.89288115.337973
36.143117
38.819269
50.882822
60.568469
1313
1923
29
53
17.913588
23.95592628.663549
37.428753
39.74597950.022667
56.3680757.89689358.47601160.104919
70.444537
Despite a renewed focus on efficiency, risk management and regulatory compliance will continue to lead the banking agenda.Rank the importance of the following agenda items for your organization*
Comments: Increased emphasis on the efficiency agenda is expected in 2016. Streamlining processes remains the most important cost-reduction initiative, but 51% of respondents now see minimizing non-essential spend as critical, compared with just 37% in 2015. There is also greater focus on parts of the growth agenda, with investing in customer-facing technology a key priority for 53% of respondents, compared with just 43% in 2015. Another route to growth may be through partnerships with industry disruptors, and 23% of respondents expect partnering with FinTech firms to be important for their institution. Nevertheless, risk management and regulatory compliance will continue to dominate the banking agenda, and the 2016 EU-wide stress test means capital requirements will be a key focus for many institutions. Cybersecurity has also gained greater prominence for bankers across Europe, with 56% citing it as important, up from 48% last year.
2015 2016142536897
10-
12151316141820212325221724
123456789101112131415161718192021222324
Risk and regulation
Cost cutting and efficiency
Innovation and growth
European Banking Barometer – 2016 31
OutsourcingNew foreign markets/internationalization
Acquiring new assets or businessesOffshoring
Disposing of assets or businessesNew remuneration systems
Establishing new business segmentsDeveloping partnerships with industry disruptors/FinTech companies
Diversity requirements relating to CRD IV²Restructuring the business to comply with regulations
Developing/introducing new productsRestructuring the business to cut costs
Current changes in financial reporting/IFRSOptimize your balance sheetThe threat of financial crime
Compliance with consumer regulation/remediationMinimizing all non-essential expenditure/cutting costs
Investing in customer-facing technologyCybersecurity/data security
Reputational risk¹Compliance with capital market regulations
Capital, liquidity and the leverage ratioStreamlining processes/further automation/investing in technology
Risk management
1140
99
3640
3030
55
5536
5555
6491
8245
82646464
OutsourcingNew foreign markets/internationalization
Acquiring new assets or businessesOffshoring
Disposing of assets or businessesNew remuneration systems
Establishing new business segmentsDeveloping partnerships with industry disruptors/FinTech companies
Diversity requirements relating to CRD IV****Restructuring the business to comply with regulations
Developing/introducing new productsRestructuring the business to cut costs
Current changes in financial reporting/IFRSOptimize your balance sheetThe threat of financial crime
Compliance with consumer regulation/remediationMinimizing all non-essential expenditure/cutting costs
Investing in customer-facing technologyCybersecurity/data security
Reputational risk***Compliance with capital market regulations**
Capital, liquidity and the leverage ratioStreamlining processes/further automation/investing in technology
Risk management
20
1120
401011
4040
5050
2020
4460
4020
403030
6060
Strategic priorities and restructuring
Risk and regulation
Cost cutting and efficiency
Innovation and growthAustria Belgium
Banks in some markets, such as Belgium and the Nordics, see investing in customer technology as their No.1 priority. Rank the importance of the following agenda items for your organization*
Base excludes respondents answering “Does not apply.” * Respondents were asked to rank the importance of activities on a scale of 0 to 10, where 0 denotes “Not at all important” and 10 denotes “Very important.” Numbers show the percentage of respondents selecting either 8, 9 or 10. ** Compliance with capital market regulations includes MiFID/EMIR. *** Reputational risk includes tax transparency, remuneration and cultural issues.**** Diversity requirements relating to CRD IV – putting in place a policy to promote diversity on the management board.
European Banking Barometer – 2016 32
OutsourcingNew foreign markets/internationalization
Acquiring new assets or businessesOffshoring
Disposing of assets or businessesNew remuneration systems
Establishing new business segmentsDeveloping partnerships with industry disruptors/FinTech companies
Diversity requirements relating to CRD IV²Restructuring the business to comply with regulations
Developing/introducing new productsRestructuring the business to cut costs
Current changes in financial reporting/IFRSOptimize your balance sheetThe threat of financial crime
Compliance with consumer regulation/remediationMinimizing all non-essential expenditure/cutting costs
Investing in customer-facing technologyCybersecurity/data security
Reputational risk¹Compliance with capital market regulations
Capital, liquidity and the leverage ratioStreamlining processes/further automation/investing in technology
Risk management
373
13
107
1515
7181920
1514
4447
5135
2449
6067
56
OutsourcingNew foreign markets/internationalization
Acquiring new assets or businessesOffshoring
Disposing of assets or businessesNew remuneration systems
Establishing new business segmentsDeveloping partnerships with industry disruptors/FinTech companies
Diversity requirements relating to CRD IV****Restructuring the business to comply with regulations
Developing/introducing new productsRestructuring the business to cut costs
Current changes in financial reporting/IFRSOptimize your balance sheetThe threat of financial crime
Compliance with consumer regulation/remediationMinimizing all non-essential expenditure/cutting costs
Investing in customer-facing technologyCybersecurity/data security
Reputational risk***Compliance with capital market regulations**
Capital, liquidity and the leverage ratioStreamlining processes/further automation/investing in technology
Risk management
181414
278
151415
211514
543638
3657
3636
715050
3650
71
Strategic priorities and restructuring
France Germany
It is also the main focus for growth for banks in many other markets, including Germany and Italy … Rank the importance of the following agenda items for your organization*
Risk and regulation
Cost cutting and efficiency
Innovation and growth
Base excludes respondents answering “Does not apply.” * Respondents were asked to rank the importance of activities on a scale of 0 to 10, where 0 denotes “Not at all important” and 10 denotes “Very important.” Numbers show the percentage of respondents selecting either 8, 9 or 10. ** Compliance with capital market regulations includes MiFID/EMIR. *** Reputational risk includes tax transparency, remuneration and cultural issues.**** Diversity requirements relating to CRD IV – putting in place a policy to promote diversity on the management board.
European Banking Barometer – 2016 33
OutsourcingNew foreign markets/internationalization
Acquiring new assets or businessesOffshoring
Disposing of assets or businessesNew remuneration systems
Establishing new business segmentsDeveloping partnerships with industry disruptors/FinTech companies
Diversity requirements relating to CRD IV²Restructuring the business to comply with regulations
Developing/introducing new productsRestructuring the business to cut costs
Current changes in financial reporting/IFRSOptimize your balance sheetThe threat of financial crime
Compliance with consumer regulation/remediationMinimizing all non-essential expenditure/cutting costs
Investing in customer-facing technologyCybersecurity/data security
Reputational risk¹Compliance with capital market regulations
Capital, liquidity and the leverage ratioStreamlining processes/further automation/investing in technology
Risk management
1720
155
1718
3332
2032
4841
3727
3439
5564
5555
4548
6467
OutsourcingNew foreign markets/internationalization
Acquiring new assets or businessesOffshoring
Disposing of assets or businessesNew remuneration systems
Establishing new business segmentsDeveloping partnerships with industry disruptors/FinTech companies
Diversity requirements relating to CRD IV****Restructuring the business to comply with regulations
Developing/introducing new productsRestructuring the business to cut costs
Current changes in financial reporting/IFRSOptimize your balance sheetThe threat of financial crime
Compliance with consumer regulation/remediationMinimizing all non-essential expenditure/cutting costs
Investing in customer-facing technologyCybersecurity/data security
Reputational risk***Compliance with capital market regulations**
Capital, liquidity and the leverage ratioStreamlining processes/further automation/investing in technology
Risk management
255
1626
2025
2024
4337
2943
5737
3335
7157
4741
6257
Strategic priorities and restructuring
Ireland Italy
… while banks in Ireland are focused on introducing more products to deliver growth.Rank the importance of the following agenda items for your organization*
Risk and regulation
Cost cutting and efficiency
Innovation and growth
Base excludes respondents answering “Does not apply.” * Respondents were asked to rank the importance of activities on a scale of 0 to 10, where 0 denotes “Not at all important” and 10 denotes “Very important.” Numbers show the percentage of respondents selecting either 8, 9 or 10. ** Compliance with capital market regulations includes MiFID/EMIR. *** Reputational risk includes tax transparency, remuneration and cultural issues.**** Diversity requirements relating to CRD IV – putting in place a policy to promote diversity on the management board.
European Banking Barometer – 2016 34
OutsourcingNew foreign markets/internationalization
Acquiring new assets or businessesOffshoring
Disposing of assets or businessesNew remuneration systems
Establishing new business segmentsDeveloping partnerships with industry disruptors/FinTech companies
Diversity requirements relating to CRD IV²Restructuring the business to comply with regulations
Developing/introducing new productsRestructuring the business to cut costs
Current changes in financial reporting/IFRSOptimize your balance sheetThe threat of financial crime
Compliance with consumer regulation/remediationMinimizing all non-essential expenditure/cutting costs
Investing in customer-facing technologyCybersecurity/data security
Reputational risk¹Compliance with capital market regulations
Capital, liquidity and the leverage ratioStreamlining processes/further automation/investing in technology
Risk management
17
1477
148
3129
213636
2942
3664
3636
5443
5757
Strategic priorities and restructuring
Netherlands Nordics
OutsourcingNew foreign markets/internationalization
Acquiring new assets or businessesOffshoring
Disposing of assets or businessesNew remuneration systems
Establishing new business segmentsDeveloping partnerships with industry disruptors/FinTech companies
Diversity requirements relating to CRD IV****Restructuring the business to comply with regulations
Developing/introducing new productsRestructuring the business to cut costs
Current changes in financial reporting/IFRSOptimize your balance sheetThe threat of financial crime
Compliance with consumer regulation/remediationMinimizing all non-essential expenditure/cutting costs
Investing in customer-facing technologyCybersecurity/data security
Reputational risk***Compliance with capital market regulations**
Capital, liquidity and the leverage ratioStreamlining processes/further automation/investing in technology
Risk management
1113
2214
222222
4444
6733
3778
6756
6756
6356
898989
7867
A significant minority of bankers in a number of markets see partnerships with industry disruptors as a path to growth.Rank the importance of the following agenda items for your organization*
Risk and regulation
Cost cutting and efficiency
Innovation and growth
Base excludes respondents answering “Does not apply.” * Respondents were asked to rank the importance of activities on a scale of 0 to 10, where 0 denotes “Not at all important” and 10 denotes “Very important.” Numbers show the percentage of respondents selecting either 8, 9 or 10. ** Compliance with capital market regulations includes MiFID/EMIR. *** Reputational risk includes tax transparency, remuneration and cultural issues.**** Diversity requirements relating to CRD IV – putting in place a policy to promote diversity on the management board.
European Banking Barometer – 2016 35
OutsourcingNew foreign markets/internationalization
Acquiring new assets or businessesOffshoring
Disposing of assets or businessesNew remuneration systems
Establishing new business segmentsDeveloping partnerships with industry disruptors/FinTech companies
Diversity requirements relating to CRD IV²Restructuring the business to comply with regulations
Developing/introducing new productsRestructuring the business to cut costs
Current changes in financial reporting/IFRSOptimize your balance sheetThe threat of financial crime
Compliance with consumer regulation/remediationMinimizing all non-essential expenditure/cutting costs
Investing in customer-facing technologyCybersecurity/data security
Reputational risk¹Compliance with capital market regulations
Capital, liquidity and the leverage ratioStreamlining processes/further automation/investing in technology
Risk management
1322
4411
3325
4438
6363
5625
3856
4444
8963
3389
78100
3378
Strategic priorities and restructuring
Poland Spain
OutsourcingNew foreign markets/internationalization
Acquiring new assets or businessesOffshoring
Disposing of assets or businessesNew remuneration systems
Establishing new business segmentsDeveloping partnerships with industry disruptors/FinTech companies
Diversity requirements relating to CRD IV****Restructuring the business to comply with regulations
Developing/introducing new productsRestructuring the business to cut costs
Current changes in financial reporting/IFRSOptimize your balance sheetThe threat of financial crime
Compliance with consumer regulation/remediationMinimizing all non-essential expenditure/cutting costs
Investing in customer-facing technologyCybersecurity/data security
Reputational risk***Compliance with capital market regulations**
Capital, liquidity and the leverage ratioStreamlining processes/further automation/investing in technology
Risk management
11
9
228
1717
5518
2537
2755
4275
2567
9258
4292
7583
Yet the risk and regulatory agenda will preoccupy most banks, including enhancing cybersecurity in Poland and meeting …Rank the importance of the following agenda items for your organization*
Risk and regulation
Cost cutting and efficiency
Innovation and growth
Base excludes respondents answering “Does not apply.” * Respondents were asked to rank the importance of activities on a scale of 0 to 10, where 0 denotes “Not at all important” and 10 denotes “Very important.” Numbers show the percentage of respondents selecting either 8, 9 or 10. ** Compliance with capital market regulations includes MiFID/EMIR. *** Reputational risk includes tax transparency, remuneration and cultural issues.**** Diversity requirements relating to CRD IV – putting in place a policy to promote diversity on the management board.
European Banking Barometer – 2016 36
OutsourcingNew foreign markets/internationalization
Acquiring new assets or businessesOffshoring
Disposing of assets or businessesNew remuneration systems
Establishing new business segmentsDeveloping partnerships with industry disruptors/FinTech companies
Diversity requirements relating to CRD IV²Restructuring the business to comply with regulations
Developing/introducing new productsRestructuring the business to cut costs
Current changes in financial reporting/IFRSOptimize your balance sheetThe threat of financial crime
Compliance with consumer regulation/remediationMinimizing all non-essential expenditure/cutting costs
Investing in customer-facing technologyCybersecurity/data security
Reputational risk¹Compliance with capital market regulations
Capital, liquidity and the leverage ratioStreamlining processes/further automation/investing in technology
Risk management
1413
92829
3321
3127
4235
5538
596868
5955
7691
7068
7685
OutsourcingNew foreign markets/internationalization
Acquiring new assets or businessesOffshoring
Disposing of assets or businessesNew remuneration systems
Establishing new business segmentsDeveloping partnerships with industry disruptors/FinTech companies
Diversity requirements relating to CRD IV****Restructuring the business to comply with regulations
Developing/introducing new productsRestructuring the business to cut costs
Current changes in financial reporting/IFRSOptimize your balance sheetThe threat of financial crime
Compliance with consumer regulation/remediationMinimizing all non-essential expenditure/cutting costs
Investing in customer-facing technologyCybersecurity/data security
Reputational risk***Compliance with capital market regulations**
Capital, liquidity and the leverage ratioStreamlining processes/further automation/investing in technology
Risk management
9
9
99999
945
1827
1045
5555
4555
8236
82
Strategic priorities and restructuring
Switzerland UK
… capital requirements in Spain and Switzerland. In the UK, the focus for most banks will be managing reputational risk.Rank the importance of the following agenda items for your organization*
Risk and regulation
Cost cutting and efficiency
Innovation and growth
Base excludes respondents answering “Does not apply.” * Respondents were asked to rank the importance of activities on a scale of 0 to 10, where 0 denotes “Not at all important” and 10 denotes “Very important.” Numbers show the percentage of respondents selecting either 8, 9 or 10. ** Compliance with capital market regulations includes MiFID/EMIR. *** Reputational risk includes tax transparency, remuneration and cultural issues.**** Diversity requirements relating to CRD IV – putting in place a policy to promote diversity on the management board.
European Banking Barometer – 2016 37
20 20 20 20 20
Not at all Slightly Moderately Considerably Significantly
Strategic priorities and restructuring
* Numbers reflect the percentage of respondents who answered. Base excludes respondents who answered “Don’t know.”** This question was added in 2016, so comparison data for 2015 is unavailable.
40
20
40
29
14
29
29
14
38
29
19
27
27
36 9
40
32
18
10
27
24
39 3 6
11
11
56
22
58 8 1
7 8 8
64
27 9
36
29
29 7
22
33
33
11
15
18
15
24
29
Austria
Belgium
Europe
France
Germany
Ireland
Italy
Netherlands
Nordics
Poland
Spain
Switzerland
UK
29
22
25
10
13
2016**
Should the UK vote to leave the EU in June, over 70% of banks would be impacted.If the UK was to leave the EU, to what extent would it impact your business?*
Comments: On 23 June 2016, voters in the UK will decide whether to remain in, or leave, the EU. Unsurprisingly, the possible impact of the UK leaving the EU is expected to be greatest for UK and Irish banks, however, 70% of all European banks believe that, if the UK were to leave, it would have some impact on their business, with almost a quarter anticipating a considerable or significant impact. Many banks, especially those with major capital markets businesses in London, would need to decide whether to scale down their UK operations and build out operations in other European financial centers. Nevertheless, it would be difficult for organizations to “lift and shift” businesses, so any relocation is likely to take an extended period of time.
European Banking Barometer – 2016 38
Strategic priorities and restructuring
* Numbers reflect the percentage of respondents who answered. Base excludes respondents who answered “Don’t know.”
20162015
Small-scale consolidation Medium-scale consolidation Large-scale consolidation Don't know
7
15
32
48
43
32
17
5
3 years
12 months
6
25
40
47
38
22
15
6
More bankers now expect some degree of consolidation in their market in the next 12 months.To what extent do you anticipate consolidation of the banking industry over the next 12 months and within the next three years?*
Comments: Eighty-five percent of respondents now anticipate some industry consolidation in the next 12 months. Most of this activity is expected to be small in scale, suggesting that banks will continue only to make disposals or acquisitions of small books of business that are closely aligned to their core strategy. However, the pace of consolidation may now be picking up. There is a modest increase in those expecting medium- or large-scale consolidation in the next 12 months – now 37% compared with just 28% last year – as well as an increase in the number of bankers expecting significant consolidation over the next three years. In the near term, consolidation may be encouraged where regulators are concerned about the solvency, stability and resolution of banks in Europe. The greatest consolidation is anticipated in markets where banks were shown to have capital shortfalls or where there is overcapacity, such as in Italy. Over the longer term, consolidation may be supported by an improvement in transparency through the introduction of the Single Supervisory Mechanism (SSM), initiating uniform capital structures and better clarity on asset valuations.
European Banking Barometer – 2016 39
1
Strategic priorities and restructuring
* Numbers reflect the percentage of respondents who answered. Base excludes respondents who answered “Don’t know.”
Austria Belgium Germany
Netherlands Nordics
SwitzerlandPoland UKSpain
Italy
France
7
51
54
35
38
77
I do not anticipate any consolidation Small-scale consolidation Medium-scale consolidation Large-scale consolidation
3 years
12 months
5
11
48
53
29
16
19
21
Ireland
15
31
62
46
15
23 7.69230799999998
29
42
29
50
43
8
22
33
44
44
33
22
53
71
38
18
6
9
91
649.090909
36
40
44
60
1144
6
17
61
53
33
27
22
33
44
6733.333333
3 years
12 months
10
20
30
50
60
30
3 years
12 months
8
50
50
17
42
33 3
3
3
Over the next three years, the most significant consolidation is expected in Austria, Germany and Poland.To what extent do you anticipate consolidation of the banking industry in your market over the next 12 months and within the next three years?*
European Banking Barometer – 2016 40
Strategic priorities and restructuring
* Numbers reflect the percentage of respondents who answered.
Sell assets Buy assets Partnerships or joint ventures
None of these
2630
3431
2528
31
35
2015 2016
However, partnerships or joint ventures remain banks’ preferred path to inorganic growth in most markets …
Which, if any, of the following is your bank likely to consider over the next 12 months in relation to the countries in which it operates?*
Comments: Banks’ appetite for acquisitions, disposals and partnerships is little changed from last year. With emerging regulation encouraging global banks to reduce their geographic coverage, partnerships – for example, correspondent banking relationships – are likely to remain the preferred form of inorganic growth or route to access new markets. This is reflected in the rise in disposals and partnerships in the Americas. Furthermore, while historically they have been focused on small acquisitions or disposals to enhance their core business, we believe that banks are now increasingly looking for acquisitions and partnerships with technology firms. Not only did 23% of respondents cite partnerships with FinTech companies as a key priority for 2016, but more than half believe investment in customer-facing technology is a critical agenda item this year. With many banks preoccupied by regulatory compliance, and challenged by budget cuts, partnerships with FinTech firms may play a key role in developing and deploying new technologies to support their growth agenda.
European Banking Barometer – 2016 41
Strategic priorities and restructuring
* Numbers reflect the percentage of respondents who answered.
Sell assets Buy assets Partnerships or joint ventures None of these
UK
Switzerland
Spain
Poland
Nordics
Netherlands
Italy
Ireland
Germany
France
Europe
Belgium
Austria
35
14
11
23
19
14
25
0
14
45
26
24
33
47
33
33
14
33
39
38
13
14
25
9
40
52
17
33
23
19
25
26
27
30
38
33
32
36
44
17
7
33
24
43
14
36
28
45
20
35
40
33
15
31
29
15
34
45
34
14
17
21
9
33
25
36
44
42
38
25
43
31
18
30
23
33
56
54
44
57
50
32
9
31
33
17
15
55
22
33
50
11
27
29
61
36
35
45
50
20162015
… except for Belgium, Ireland and Spain, where acquisitions are expected. Which, if any, of the following is your bank likely to consider over the next 12 months in relation to the countries in which it operates?*
European Banking Barometer – 2016 42
Strategic priorities and restructuring
* Numbers represent the total number of mentions for that particular region. Respondents could state more than one region.** Includes responses for “Rest of the world” and “Worldwide.”
Joint ventures
Sell assets
Buy assets
0 5 10 15 20
8
5
3
8
8
6
North America
Joint ventures
Sell assets
Buy assets
0 5 10 15 20
6
5
4
8
5
7
Asia-Pacific
Joint ventures
Sell assets
Buy assets
0 20 40 60
56
37
51
50
42
44
Europe
Joint ventures
Sell assets
Buy assets
0 5 10 15 20
2
2
2
5
1
South America
Joint ventures
Sell assets
Buy assets
0 5 10 15 20
3
2
7
2
4
Middle East and Africa
Joint ventures
Sell assets
Buy assets
0 5 10 15 20
2
3
1
10
7
2
Across the world**
20162015
And joint ventures will play a key role for banks looking to expand in new markets. In which regions is your bank likely to sell assets, buy assets or consider joint ventures over the next 12 months?*
European Banking Barometer – 2016 43
Section 4
Compensation and headcount
European Banking Barometer – 2016 44
+/- 10%
+/- 8%–10%
+/- 5%–8%
+/- 2%–5%
+/- 1%–2%
Total
2
2
2
6
11
22
2
5
1
5
3
17
Headcount and compensation
Base excludes respondents answering “Don’t know.” * Numbers reflect the percentage of respondents who answered. Respondents answering “Stay the same” are not displayed.3. EY’s Global Banking Outlook 2016: Transforming talent – The banker of the future is available to download at ey.com/bankingtalent.
Decrease Increase
Netincrease
5
8
1
1
-3
0
Pay rises are expected to be modest in light of regulatory and investor pressures.Compared with the last 12 months (FY15), to what extent will aggregate (i.e., total fixed and performance-related) compensation change at your bank over the next 12 months (FY16)?*
Comments: Bankers anticipate ongoing moderation of pay, reflecting the impact of weak business performance, as well as regulatory and shareholder pressure. Although 22% of bankers still anticipate a rise in aggregate pay in 2016 – the same number as in 2015 – just 12% anticipate a rise greater than 2%, compared with 17% last year, while 60% of bankers expect aggregate pay to remain flat in 2016. This trend is likely to continue as institutions will face greater regulatory pressure when the EBA sets out its “sound remuneration policies,” which are expected to come into force by January 2017, introducing new rules limiting bonuses to a maximum of two times salary. Pay must now be better aligned to both institutional and individual performance, as well as to risk. The downward pressure on pay may mean banks will need to find new approaches to recruiting and retaining staff in future.3
European Banking Barometer – 2016 45
-4.76190499999998
-4.76190499999998
-9.52381
10
5
29
5
48
+/- 10%
+/- 8%–10%
+/- 5%–8%
+/- 2%–5%
+/- 1%–2%
Total
10
10
20
20
-6.89655199999999
-6.89655199999999
-3.448276
-17
3.448276
3.448276
6.89655199999999
14
+/- 10%
+/- 8%–10%
+/- 5%–8%
+/- 2%–5%
+/- 1%–2%
Total
2.816901
29.577465
32.394366
-1.408451
-5.633803
-7.042254
7
7
7
21
7
7
9.090909
9.090909
-9.090909
-9.090909
Headcount and compensation
Base excludes respondents answering “Don’t know.”* Numbers reflect the percentage of respondents who answered. Respondents answering “Stay the same” are not displayed.
Austria
Germany
Belgium
Ireland
France
Italy
Decrease Increase
Netincrease
-10
0
-10
0
0
0
Netincrease
0
0
0
0
0
0
Netincrease
Netincrease
25
24
1
0
0
0
Netincrease
38
5
24
5
10
-5
Netincrease
-3
3
3
-3
0
-7
14
7
7
0
0
0
Bankers in France, Germany, Ireland, the Nordics and Switzerland anticipate small increases in pay …Compared with the last 12 months (FY15), to what extent will aggregate (i.e., total fixed and performance-related) compensation change at your bank over the next 12 months (FY16)?*
European Banking Barometer – 2016 46
6
12
9
3
29
5.882353
8.823529
2.941176
17.647059
9.090909
27.272727
36.363636
+/- 10%
+/- 8%–10%
+/- 5%–8%
+/- 2%–5%
+/- 1%–2%
Total
11
11
22
11
11
22
-9
-18
-27
9
9
18
7.14285699999997
7.14285699999997
14.285714
-7.14285699999997
-7.14285699999997
+/- 10%
+/- 8%–10%
+/- 5%–8%
+/- 2%–5%
+/- 1%–2%
Total
11
11
22
11
56
11.111111
11.111111
Headcount and compensation
Base excludes respondents answering “Don’t know.”* Numbers reflect the percentage of respondents who answered. Respondents answering “Stay the same” are not displayed.
Netherlands
Spain
Nordics
Switzerland
Poland
UK
Netincrease
-44
-11
-11
0
-11
-11
Netincrease
7
7
0
0
0
0
Netincrease
-9
9
-9
-9
0
0
Netincrease
0
11
-11
0
-11
11
Netincrease
36
27
0
0
0
9
Netincrease
-12
0
0
6
-12
-6
Decrease Increase
… but remuneration is expected to fall in most other markets, with the Netherlands and the UK anticipating some of the greatest cuts.Compared with the last 12 months (FY15), to what extent will aggregate (i.e., total fixed and performance-related) compensation change at your bank over the next 12 months (FY16)?*
European Banking Barometer – 2016 47
27 2358
23 33816
Headcount and compensation
Base excludes respondents answering “Don’t know/Depends.”* Numbers reflect the percentage of respondents who answered. Respondents answering “Stay the same” are not displayed.
2016
Increase significantlyIncrease slightlyDecrease significantly Decrease slightly
2015
Net increase
-28
-15
With a renewed focus on cost cutting in many markets, most bankers anticipate further reductions in headcount …Over the next 12 months, how do you expect the headcount of your bank to change?*
Comments: With cost cutting a greater priority for banks in 2016, it is unsurprising that more bankers now anticipate headcount reductions – one of the quickest ways of reducing expenditure. Fifty-four percent of bankers now expect headcount to fall, compared with just 43% in 2015. Despite this renewed focus on reducing staff numbers, outsourcing and offshoring remain relatively low priorities for banks in the near term. However, we anticipate an increase in banks entering outsourcing or managed service partnerships in the medium term, as job cuts force banks to seek more cost-efficient ways to deliver non-core services.
European Banking Barometer – 2016 48
UK
Switzerland
Spain
Poland
Nordics
Netherlands
Italy
Ireland
Germany
France
Europe
Belgium
Austria
32
18
44
50
50
33
30
14
56
36
38
27
20
-23.529412
-22.222222
-8.333333
-7.14285699999997
-33.333333
-18.181818
-19.47619
-4.225352
-14.285714
-15.63681
-18.181818
-40
24
18
22
17
7
11
27
48
14
36
23
36
30
6
9
11
5
3
Headcount and compensation
Base excludes respondents answering “Don’t know/Depends.”* Numbers reflect the percentage of respondents who answered. Respondents answering “Stay the same” are not displayed.
UK
Switzerland
Spain
Poland
Nordics
Netherlands
Italy
Ireland
Germany
France
Europe
Belgium
Austria
27
31
50
46
56
29
35
44
27
35
33
17
-6.666667
-7.69230799999998
-12.5
-14.285715
-19.999999
-2
-9.090909
-8.358157
-19.047619
-33.333332
43
21
13
31
19
29
20
22
27
27
24
17
5
13
2
10
-33
-19
-15
-9
-24
-35
-14
-50
-23
-25
-5
10
2015 Net increase
Increase significantlyIncrease slightlyDecrease significantly Decrease slightly
-30
-9
-28
-14
-46
19
-21
-44
-50
-42
-44
9
-26
2016 Net increase
… except in Ireland and Switzerland, where a rise in headcount is anticipated.Over the next 12 months, how do you expect the headcount of your bank to change?*
European Banking Barometer – 2016 49
25
5
28
26
44
25
40
33
51
56
32
51
34
47
21
18
10
18
Headcount and compensation
Base excludes respondents answering “Don’t know/Depends.”* Numbers reflect the percentage of respondents who answered. Respondents answering “Stay the same” are not displayed.
Administration
Other head-office functions
Retail and business banking
Investment banking
Operations and IT
Corporate banking
Private banking and wealth management
Asset management
Compliance, risk and finance
2
10
7
6
13
12
5
10
31
32
17
28
7
7
7
12
■ Decrease ■ Increase
20162015 Net increase
Net increase
-2
-1
4
7
-21
-10
-22
-29
33
23
21
4
-3
-8
-23
-27
-31
Most job cuts will be in administrative and head-office functions, as well as in retail banking.In which areas of the business do you expect headcount to change?*
Comments: As in last year, the greatest headcount reductions are anticipated in operations and IT, other head-office functions and retail banking. Unsurprisingly, recruitment will be focused on growth sectors such as corporate banking, private banking, and wealth and asset management. However, in contrast to 2015, most markets anticipate an increase in headcount in compliance, risk and finance, which reflects the prioritization of risk and regulation across the industry.
European Banking Barometer – 2016 50
17666
39
617
28
3311
226
331111
6
AdministrationOther head-office functions
Retail and business bankingInvestment banking
Operations and IT
Corporate bankingPrivate banking and wealth management
Asset managementCompliance, risk and finance
5611
4422
4411
1133
11.11111111.111111
22.2222211.111111
22.222222
AdministrationOther head-office functions
Retail and business bankingInvestment banking
Operations and ITCorporate banking
Private banking and wealth managementAsset management
Compliance, risk and finance
7.54717
3.7735851.8867929.4339627.547177.54717
5.66037699999998
9.433962
5113
5311
4313
68
19
Headcount and compensation
Base excludes respondents answering “Don’t know.”* Numbers reflect the percentage of respondents who answered. Respondents answering “Stay the same” are not displayed.
Germany
Belgium
Ireland
FranceAustria
■ Decrease ■ Increase
Italy
443333
33
22.222222
22.22222211.11111111.111111
22.22222222.222222
8.333333
8.33333316.666667
8.3333338.33333316.66666716.666667
25
178
4217
8
8
8
4
124
1612128
20
3616
408
2824
84
However, some hiring is anticipated in growth businesses such as private banking and asset management. In which areas of the business do you expect headcount to change?*
European Banking Barometer – 2016 51
20
20
6020
40
20
4020
2020
20
Headcount and compensation
Spain
Netherlands
■ Decrease ■ Increase
Nordics
Switzerland
Poland
UK
AdministrationOther head-office functions
Retail and business bankingInvestment banking
Operations and IT
Corporate bankingPrivate banking and wealth management
Asset managementCompliance, risk and finance
12.5
12.512.512.512.5
12.5
1313
2538
50
13
AdministrationOther head-office functions
Retail and business bankingInvestment banking
Operations and ITCorporate banking
Private banking and wealth managementAsset management
Compliance, risk and finance
5038
1325
3825
1313
25
12.5
12.512.5
11.111111
11.111111
5633
442222
44
5622
56
2211
11.111111
11.11111111.111111
1071014
2171414
24
4134
244141
2131
1717
Base excludes respondents answering “Don’t know.”* Numbers reflect the percentage of respondents who answered. Respondents answering “Stay the same” are not displayed.
And most markets anticipate an increase in compliance staff, except in Austria, the Nordics, Poland and Spain.In which areas of the business do you expect headcount to change?*
European Banking Barometer – 2016 52
Section 6
Outlook by market
European Banking Barometer – 2016 53
Outlook by market
Market Financial performance
Headcount Compensation Strategic priority
Austria
Belgium
France
40% -30% -10%
18% -9% 0%
21% -14% 14% 71%
91%
Highest strategic priorities
60%
Net number of respondents anticipating improvement (∧)/ worsening of financial performance (∨).Net number of respondents anticipating headcount increase (∧) / decrease (∨).Net number of respondents anticipating compensation increase (∧) / decrease (∨).
1) Risk management 2) Streamlining processes, further automation
and investing in technology 3) Minimizing all non-essential expenditure and
cutting costs
Investing in new customer-facing technology, e.g., mobile solutions
1) Risk management 2) Cybersecurity and data security
Highest strategic priority
Highest strategic priorities
Risk and regulation Cost cutting and efficiency Innovation and growth
European Banking Barometer – 2016 54
Market Financial performance
Headcount Compensation Strategic priority
Germany
Ireland
Italy
Outlook by market
-11% -46% 25%
71% 19% 38%
45% -21% -3% 67%
71%
67%
Net number of respondents anticipating improvement (∧)/ worsening of financial performance (∨).Net number of respondents anticipating headcount increase (∧) / decrease (∨).Net number of respondents anticipating compensation increase (∧) / decrease (∨).
Highest strategic priorityRisk management
Highest strategic priorityCybersecurity and data security
Highest strategic priorityStreamlining processes, further automation and investing in technology
Risk and regulation Cost cutting and efficiency Innovation and growth
European Banking Barometer – 2016 55
Market Financial performance
Headcount Compensation Strategic priority
Netherlands
Nordics
Poland
1) Capital, liquidity and the leverage ratio2) Reputational risk3) Compliance with capital markets regulations
(e.g., MiFID II/EMIR)
Outlook by market
56% -44% -44%
36% -50% 7%
-58% -42% -9% 92%
64%
89%
Net number of respondents anticipating improvement (∧)/ worsening of financial performance (∨).Net number of respondents anticipating headcount increase (∧) / decrease (∨).Net number of respondents anticipating compensation increase (∧) / decrease (∨).
Highest strategic priorities
Highest strategic priorityCapital, liquidity and the leverage ratio
Highest strategic priorityInvesting in new customer-facing technology, e.g., mobile solutions
Risk and regulation Cost cutting and efficiency Innovation and growth
European Banking Barometer – 2016 56
Outlook by market
Market Financial performance
Headcount Compensation Strategic priority
Spain
Switzerland
UK
44% -44% 0%
9% 9% 36%
53% -26% -12% 91%
82%
100%
Net number of respondents anticipating improvement (∧)/ worsening of financial performance (∨).Net number of respondents anticipating headcount increase (∧) / decrease (∨).Net number of respondents anticipating compensation increase (∧) / decrease (∨).
Highest strategic priorityReputational risk
Highest strategic priorities1) Risk management 2) Capital, liquidity and the leverage ratio
Highest strategic priorityCapital, liquidity and the leverage ratio
Risk and regulation Cost cutting and efficiency Innovation and growth
European Banking Barometer – 2016 57
Section 7
Contacts
European Banking Barometer – 2016 58
Contacts
France
Luc Valverde+33 1 46 93 63 [email protected]
Germany
Dirk Müller-Tronnier+49 6196 996 [email protected]
Ireland
Cormac Murphy+35 3 1221 2750 [email protected]
Italy
Massimo Testa+39 02 7221 [email protected]
Netherlands
Alexander Beijer+31 88 407 [email protected]
Nordics
Lars Weigl+46 8 520 590 [email protected]
Poland
Dominik Januszewski+48 22 557 [email protected]
Spain
José Carlos Hernández Barrasús+34 91 572 [email protected]
Switzerland
Olaf Toepfer+41 58 286 [email protected]
UK
Robert Cubbage+44 20 7951 [email protected]
EMEIA
Marie-Laure Delarue+41 58 286 [email protected]
Karl Meekings+44 20 7783 [email protected]
Austria
Friedrich Hief+43 1 21170 [email protected]
Belgium
Philippe Desombere+32 2 774 [email protected]
For more information on how we can help, please contact our team:
European Banking Barometer – 2016 59
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