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The Europe Banking Sectors : A Company and Industry Analysis (August 2006)
Mergent, Aug 2006, Pages: 36
This report looks at the banking industry in Europe, with a focus on France, Germany, Italy, the Netherlands, Spain and the United Kingdom
Current Environment - Key Points
- In the first half of 2006, the financial results for most banks were positive despite a tougher operating environment, uncertainty over interest rates and regulatory changes
- On June 8, the European Central Bank (ECB) raised interest rates by a quarter-point to 2.75%, after keeping its benchmark rate at 2% for two years - to keep inflation at bay
- Since mid-2005 and through the first half of 2006, the profitability of European banks improved tremendously, even among the formerly weak performing ones
- The Dow Jones Euro Stoxx Banks Index climbed from 379.81 points in early January to 429.88 points in late May, gaining 50.07 points overall
- As banks sought greater capitalization, economies of scale and wider revenue sources, M&A activity in the European banking sector rose in the first half of 2006
Industry Profile - Key Points
- The continued consolidation has led to a marked shrinkage in the number of banks in Europe, the creation of European banking titans and the privatization of a number of banks in Europe
- According to ECB's Monthly Bulletin for May, assets of Eurozone financial institutions totaled -24,741.9 billion (US$31,271.29 billion) in April 2006, growing by 18.9% from the corresponding period in 2003, a 9.7% increase in 2004 and an 8.2% rise in 2005
- In the European banking platform, wealth and asset management is the main plank from which banks will springboard to a new period of growth
- Banks are now gradually moving toward the concept of bancassurance, or selling of insurance products through bank branch networks
- The European Commission (EC) is concerned that credit card fees vary widely within the EU for no obvious reason and that customers and businesses that accept credit cards are paying too much
Market Trends and Outlook - Key Points
- Due to restructuring, fiercer competition and the pressure of market consolidation, European banks are facing pressure to cut costs further despite rising profits
- Islamic banking has taken many by surprise because of its rapid growth and has attracted the attention of investors and bankers across the world
- European banks are establishing new security tools and fundamentally changing the way they verify the identity of online customers to maintain the much-needed confidence in electronic banking
- To meet ambitious growth targets, consolidation in the European banking sector, particularly among Italian and German banks, appears set to continue for the rest of 2006
- In the next few years, SME credit volume is expected to grow with banks committed to providing services and appropriate finance for small businesses
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