"New reality" in banking
Retail banking has reached a crossroad. After an unprecedented market panic followed by large-scale government bailouts and other support measures, banks face various challenges. In a study of 35 banks, mostly in Europe, Roland Berger analyzed disparities in the Return on Equity (ROE) of the worst- and best-positioned players during the financial crisis.
While there is no silver bullet for facing challenges that have emerged in European retail banking, it is clear that going forward the main areas of focus will be funding, restructuring and investment opportunities.
The winning banks will have solid funding, a lean structure with a fully integrated multichannel model and will be capable of grasping and leveraging investment opportunity in a systematic way. Generally speaking, even the best players are expected to experience a reduced level of profitability going forward.
However, there are some clear strategic priorities in order to limit the degree of ROE compression. These are capital and funding structures, cost effectiveness, customer service models and expansion strategies.