Europe’s banks are set to take a large financial hit from the COVID-19 crisis, both in credit losses and in several years’ worth of weaker earnings that are expected to follow. After a decade of strengthening balance sheets, however, the industry looks sufficiently robust to sustain the economic shock and expected credit losses.
Banks have worked hard to maintain their operations and to support
their customers during the lockdowns thus far, and they are partnering
with governments to protect the economy. Some goodwill, in short supply
for years, is being replenished.
In this European Banking report, we therefore look at whether this is
a moment that could bring about more far-reaching and much needed
changes to the industry.
European banks facing more than €400 billion of credit losses
Europe’s banks are entering a period of high credit losses in both
corporate and retail portfolios, combined with a slowing of new business
and compressed margins. By 2022, the fortunes of banks will vary more
than today and the industry as a whole will still be suffering from weak
economics.
Our report estimates that European banks, defined as those reporting
data to the European Banking Authority (European Union, United Kingdom,
Norway), face more than €400 billion of credit losses in the next three
years. This is two and a half times the total provisions made over the
previous three years, a period of relatively low losses. Losses from
COVID-19 would be less than 40 percent of those experienced during the
global financial crisis of 2008-10, and a similar overall level to the
Eurozone crisis of 2012-14.
At this level of losses, 70 percent of banks in the European Union
and United Kingdom will maintain a core tier-one equity (CET1) ratio of
greater than 12 percent. Considering the size of the economic shock, this can be considered a success for banks and a validation of post-financial-crisis prudential reforms.
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" data-filename="Exhibit-1-European-banking-credit-losses-outlook-web.png">
Bank revenues to fall by €30 billion by 2022
Revenues in the European banking industry are expected to fall by €30
billion by 2022 as net interest margins and fee income go into reverse
at the same time in retail and commercial banking. This will be
compounded by the crowding out of private debt by government schemes and
borrowers looking to repay debt as the economy recovers. We expect net
interest income to be eight percent lower in 2021 than it was in 2019,
and fee income to be three percent lower.
The future landscape of European banking
Distinct groups of banks will emerge based on their financials.
Nearly 25 percent of the industry’s capital will sit in institutions
with core tier one equity below 12 percent and returns below 8 percent.
They face immediate challenges driven by weakened balance sheets and an
inability to rebuild organically. A fifth of these banks are most
troubled, with returns likely to be below 4 percent. Many of these
institutions will need to go through a round of restructuring, with
market concentration in a subset of the countries affected hindering
consolidation, adding to the challenge.
There is also going to be a set of institutions – potentially making
up more than half of the industry capital base – that could be
considered to be in a kind of “limbo.” These banks are set to emerge
from the crisis with enough capital to meet regulatory requirements but
will be generating returns on equity of less than 8 percent.
AADB 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" data-filename="Exhibit 5_ Distribution of total industry capital by returns and capital level-web-02.png">
The actions European banking leaders will have to take
Given that industry growth is expected to be low, improved returns
will need to come from reducing cost or capital intensity. Cost
reduction is not a new theme for European banks, but a new level of
ambition can be set on operational efficiency. For the banks considered
“in limbo” to reach 8 percent return on equity will on average require
costs to be cut by 15 percent and the balance sheet to be reduced by
10-15 percent.
The universal bank model – with retail and commercial banking, a
transaction bank network, and capital markets presence – will be
sustainable only for a handful of players. Beyond this small number of
banks, more creative participation decisions will be needed.
full report at Oliver Wyman
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