Editorial & Advertiser Disclosure Global Banking And Finance Review is an independent publisher which offers News, information, Analysis, Opinion, Press Releases, Reviews, Research reports covering various economies, industries, products, services and companies. The content available on globalbankingandfinance.com is sourced by a mixture of different methods which is not limited to content produced and supplied by various staff writers, journalists, freelancers, individuals, organizations, companies, PR agencies Sponsored Posts etc. The information available on this website is purely for educational and informational purposes only. We cannot guarantee the accuracy or applicability of any of the information provided at globalbankingandfinance.com with respect to your individual or personal circumstances. Please seek professional advice from a qualified professional before making any financial decisions. Globalbankingandfinance.com also links to various third party websites and we cannot guarantee the accuracy or applicability of the information provided by third party websites. Links from various articles on our site to third party websites are a mixture of non-sponsored links and sponsored links. Only a very small fraction of the links which point to external websites are affiliate links. Some of the links which you may click on our website may link to various products and services from our partners who may compensate us if you buy a service or product or fill a form or install an app. This will not incur additional cost to you. A very few articles on our website are sponsored posts or paid advertorials. These are marked as sponsored posts at the bottom of each post. For avoidance of any doubts and to make it easier for you to differentiate sponsored or non-sponsored articles or links, you may consider all articles on our site or all links to external websites as sponsored . Please note that some of the services or products which we talk about carry a high level of risk and may not be suitable for everyone. These may be complex services or products and we request the readers to consider this purely from an educational standpoint. The information provided on this website is general in nature. Global Banking & Finance Review expressly disclaims any liability without any limitation which may arise directly or indirectly from the use of such information.

Unsustainable profits, increasing market share from financial intermediaries and poor market valuations puts UK and European banks at risk, warns new study

A new study of the 50 largest banking groups in the UK and Europe has revealed that although profits have increased, future profitability is at significant risk.

The UK & European Banking Study (EBS), launched today by zeb, one of the leading strategy and management consultancies in financial services, shows that banks are operating in unstable market conditions fuelled by unsustainable profit-taking, crisis level valuations and dwindling market share.

While profitability (RoE) improved throughout 2017 (from 3.9% to 7.1%), the report states that the ability is highly unlikely for banks to repeat these gains going forward. Profit improvements from reduced non-litigation and extraordinary costs have allowed net profits to surge, but it’s hiding the fact that maintaining sustainable recurring profits will be nearly impossible.

Banks are also losing market share to other financial intermediaries including shadow banks and non-banks. These intermediaries now hold almost half of the assets in the European financial sector moving from 22% in 2008 to 48% in 2017. Add-in insurers and pension funds, and this grip on what were bank assets increases to 63%, according to the study.

Bertrand Lavayssière, Managing Director UK at zeb, says: “While these profit results may look positive, they are, for most institutions, superficial and hide the reality. With unsustainable profit-taking and non-banks continuing to gain market share, banks have built profits on a windfall situation. The time has now come to shift towards operational improvements and to decouple those aspects of the value chain that no longer enhance value for customers.

“A decade after the banking crisis, we have now reached a tipping point and banks urgently need to switch from “recovery mode” to “action mode”.

The study outlines four strategic options banks can choose to combat market conditions and produce value with true differentiation. They include: pursuing M&A, focusing on product specialisation, breaking up the value chain and participating in financial ecosystems or platforms.

Mr. Lavayssière commented: “Top performing banks will be those who are most capable of selecting a path of true differentiation while simplifying and standardising the rest.”

About the UK & European Banking Study:

The study is the industry’s leading research for understanding issues impacting the Top 50 European Banks.

EBS 18 profiles and ranks every top 50 European bank, based on analysis of capitalisation, total assets and return on equity. The study will show why recent profitability improvements may only be a short-term gain and how market shares are under attack.

Industry executives will also gain insights to address consolidation, regain market share and improve profits by focusing on areas like customer relationships, product specialisation, disintermediation and ways to simplify and standardise for greater operational profit improvements.

To learn more and obtain a copy of the new report, please visit http://zeb.eu/ebs18

or email [email protected] .