Study on "Banking with corporate customers" reveals gross revenue potential of more than EUR 30 billion in Germany

• Banks are profiting considerably from the economic recovery – Business with corporate customers is booming
• After the financial crisis, banks need to work on their image – To do so, high ratings and sound risk measurement play a crucial role
• Banks need to win back their customers' trust: Open communication and competent advice are key success factors on the market
• Banks alone cannot cover the financial needs of companies – Threat of a EUR 260 billion financing gap by 2014

After the severe economic crisis, things are looking up for banks in Germany. This is because business with corporate customers is booming and offers gross revenue potential of over EUR 30 billion. However, banks in this sector must meet new challenges: good ratings and credible risk measurement are more important than ever. Open communication and competent customer advice are necessary to win back the trust of customers. These are the findings of a joint study conducted by Roland Berger Strategy Consultants and FINANCE Research, entitled "Banking with corporate customers – Drivers and success factors: What banks must do in the future."

"As a result of the growing economy, German banks are expecting major improvements in their corporate customer business. This represents a promising growth market for banks," says Udo Bröskamp, Partner at Roland Berger Strategy Consultants. "If the economy continues to grow like this, demand for bank services such as loans, payment transactions, hedging products and trade finance will take off." Past experience has shown that earnings in corporate banking tend to grow faster than the GDP. However, business in Germany – in contrast to many neighboring countries – is highly fragmented throughout the country. This means banks must deal with special market requirements in terms of their sales and support strategies. Furthermore, foreign business plays a key role: "More and more companies are pushing their international business and therefore need cross-border bank support," says Bastian Frien, Editor-in-Chief of the magazine FINANCE and co-author of the study. "This does not mean that German banks must have branches all over the world. What's more important is that banks specialize in international business and offer excellent services in this area."

Banks need to win back their customers' trust

Banks must focus on providing better services in the corporate banking sector. Following the financial crisis, banks need to make their processes more efficient and transparent – this includes everything from customer contacts to transaction settlement. By doing so, banks can win back their customers' trust. This means careful HR policies are needed, especially when selecting corporate customer advisors: "Competent customer support is a decisive success factor for banks," explains Udo Bröskamp. "Constantly changing service representatives or unclear competences are disconcerting for bank customers. Nevertheless, not all banks have recognized the key role corporate customer advisors play. A lot of catching up is needed here."

Good ratings and portfolio management are crucial for maintaining a competitive edge

The economic crisis revealed considerable deficits at many banks: stark differences in refinancing costs, the varying development of the equity basis and inherent threats of some business models have forced banks to focus more on portfolio management. "Many banks lost their credibility during the crisis," states Udo Bröskamp, Partner at Roland Berger. "To regain credibility, banks must demonstrate that they can accurately assess risks and competently manage their portfolios."

Financing gap threatens SMEs

The positive impact of the recovery could however lead to a financing gap. "Most companies have successfully weathered the crisis and now need funds for new investments," says Bastian Frien, Editor-in-Chief of the magazine FINANCE. "However, rising credit needs among companies are colliding with bank equity restrictions. This means banks cannot cover all borrowing needs." If no additional equity is generated, a financing gap of up to EUR 260 billion could build up by 2014. This would lead to a credit crunch, especially among SMEs and companies with poor credit ratings. Therefore, besides banks, providers of innovative financing solutions will become more important. Such solutions will range from admitting institutional investors in syndicate financing to using credit funds or individual investments by institutional investors.