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As European bank bosses met in Brussels their discussions were dominated by concerns about the growing gulf with resurgent US rivals and the competitive threat from big technology groups in America and China.
Consolidation would be one solution, giving European banks the scale to keep pace with US competitors and the resources to invest in costly but necessary digital transformation.
Jean-Pierre Mustier, chief executive of Italy’s UniCredit, said EU policymakers were “focusing on the wrong issues” by trying to create deeper European capital markets to match those in the US, arguing that banks are the only viable way to finance the continent’s large population of small- and mid-sized businesses.
“There will be many fewer banks,” said Mr Winters, StanChart’s chief executive, predicting that new technologies such as blockchain will drive the marginal cost and price of banking products down near to zero, squeezing bank’s profit margins.
Other executives said mid-sized lenders were facing the greatest pressure to merge, a trend already underlined with this month’s approach for Virgin Money by CYBG in the UK.
“The majority of European banks are not generating returns [on equity] above their 8 per cent cost of capital,” said Francesca McDonagh, chief executive of Bank of Ireland. “There is a likelihood of more consolidation, particularly in the squeezed middle . . . where they need scale to achieve cost reductions and efficiency to generate higher returns.”
Tim Adams, chief executive of the IIF, said: “You are going to see consolidation because with technology in banking you need scale. But in Europe, politics is becoming more national and fragmented while technology is becoming more global and borderless.”
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