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European Corporate and Investment Banks are Gambling with their Futures

European corporate and investment banks (CIBs) have lost ground in recent years to American competitors, a study by Eurogroup Consulting. Beyond cyclical factors, this is due to an increasingly restrictive regulatory environment, the delay in banks restructuring and digitalising their activities, as well as the rise of alternative financing.

The European consulting firm Eurogroup Consulting, in an exclusive study on corporate and investment banking, reveals the numerous challenges European CIBs urgently need to address and outlines solutions to help them return to a growth track. Without in-depth reforms, they risk a significant and continuing performance gap.

European CIBs are lagging behind their US counterparts. Over 10 years their market share has fallen from 50% to 33%, with a 25% drop in overall turnover over the past 5 years, from €82 billion to €61 billion. These overall figures do not reflect all the disparities between mid-sized banks or those operating in secondary markets. The study shows that there are still opportunities for growth.

Eurogroup Consulting’s study explains the reasons for this gap.

From a cyclical point of view, US banks enjoy strong competitive advantages linked to their own market but also as a result of a more flexible regulatory environment than that in Europe and a judicial system that sanctions European banks. Regulation more favourable to banks in the City of London post BREXIT would strengthen the lack of competitiveness of European CIBs. 

The key factor is the slowness of European CIBs to reorganise and digitalise their operations, a shift that’s much more advanced in the United States. This requires adapting business and operational models to be more customer-centric, not just in the company’s IT systems, but also across banking structures, skill-sets, methodologies and decision-making.  

Digital is an increasingly essential driver of performance. It is changing the day-to-day operations of corporate bankers, as well as the overall banking sector, impacting both profit and loss in terms of revenues and costs. The main risk in digital projects lies in not being able to implement them on the scale required without mobilising staff from the bottom up.

Eurogroup Consulting recommends targeted and cost-effective projects, focusing first on enhancing the customer experience. In a volatile macroeconomic context, the resilience of a bank to the shocks of a financial crisis must be at the heart of any change project.

Traditional corporate and investment banks are also being challenged in their once-essential core business of financing the economy. The entry of new players such as “non-bank financial institutions” is weakening historical European players and disrupting the market. For example, in 2017, so-called alternative financing amounted to US $ 550 billion and could reach $ 1000 billion by 2022.  Even though corporate and investment banks have begun to diversify by positioning themselves in these alternative financing markets, the challenge is immense. 

These profound changes require traditional European CIBs to adapt more quickly. If the ‘augmented banker’ of the future – multi-channel, agile, super-compliant and customer-focused – remains the ideal to aim for, some banks have already begun to lay the groundwork for developing this profile and freeing up time for higher added-value tasks. It remains an enormous challenge to transform the knowledge, expertise and skills in large organisations. 

Eurogroup Consulting’s Global Head of Wholesale Banking Practice, Pierre Reboul: “With loss of market share, increased regulatory constraints, delays in digitalisation … European banks have major challenges to overcome. Today we are at a crossroads to reinvent the future of corporate and investment banking as agile and resilient. It’s an issue of survival and European sovereignty.”


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