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The Europe Banking Sectors : A Company and Industry Analysis (August 2004)
Mergent, Aug 2004, Pages: 36
Current Environment - Key Points
- Despite the economic slowdown over the past three years, the European banking sector has managed to stay in an overall robust condition
- Many banks- business lines continue to be supported by a relatively low inflation and interest rate environment as they progress into 2004
- In the first half of 2004, the earnings of major European banks were generally sound, following solid financial results in 2003
- The European banking sector is again experiencing a rise in consolidation deals following increasing pressures for bigger capitalization and size
- Some of Europe's top banks are now seeking cross-border takeover targets, hoping to increase their market share and profits
- A major factor expected to fuel M&A activity for the rest of 2004 will be the availability of ready finance from banks
Industry Profile - Key Points
- Over the course of 2003, Europe's 18 major banks reported combined total assets of about -8,478.8 billion (US$10,362.3 billion), about 8.8% higher than the -7,794.2 billion (US$9,605.6 billion) in 2002
HSBC Holdings plc led the sector with total assets of -1,034.2 billion (US$1,272.8 billion) - 12.2% of the total combined assets
- On April 5, Europe joined forces with the banking associations in the US, Australia and Canada to establish the London-based International Banking Federation
- The EU enlargement on May 1, 2004 brought new challenges for the industry to go ahead with the smooth convergence of the revised Eurosystem, while ensuring, an enhancement of respective countries- macroeconomic and financial stability
- There is increasing need for structural reform of the region's capital markets, as it is a much needed tool to support the sustainability of the social security system
- In its 2003 review of the Monetary Policy Strategy, named -confirmation and clarification-, the ECB further emphasized the medium-term orientation of its monetary analyses and clarified the role of monetary analysis in the strategy
- The region's banks are increasing their participation in combating terrorism and money laundering through the implementation of the Financial Action Task Force on Money Laundering (FATF)'s -40 Recommendations- guidelines
- To further develop into a market of 500 million Single Euro Payment Area consumers who make and receive more than 100 billion non-cash payment transactions per year, the EC in December 2003 issued a new set of guidelines for the establishment of a legal framework for payments in the EU internal market
Market Trends and Outlook - Key Points
- European banks- IT spending is estimated to reach more than -44.6 billion (US$54.9 billion) by the end of 2004, and is likely to be led by several of Europe's key players
- Driven by the need to improve bank efficiency and reduce processing costs, IT spending is likely to grow more rapidly than most areas of bank expenditure
- European banks, particularly those in highly concentrated local markets, are taking bigger steps into global banking
Mergers are seen as the most convenient route to achieving substantial growth
- Apart from cross-border M&A among European banks, the industry is experiencing increasing transatlantic consolidations, as American banks try to gain a greater foothold in the Eurozone
- Europe's leading banks are eagerly answering China's call for more foreign investment as it opens up its potentially massive market
- Although some positive trends were confirmed in Q1 of 2004, the industry's overall business outlook remains relatively unclear throughout this year, despite buoyant lending demand
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