european banking barometer

8/13/2019 European Banking Barometer

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European Banking Barometer 2H13A brighter outlook?


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Contents

Page

1 Introduction 3

2 European overview 6

3 Economic environment 8

4 European sovereign debt crisis 11

us ness ou oo an ocus areas

6 Business priorities and product line expectations 30

7 Headcount 448 Contacts 50

European Banking Barometer 2H13Page 2


3/52

Introduction

As part of EYs commitment to building a better working world, we have developed the European Banking Barometer to

provide our clients with insight into the macro-economic outlook and its impact on the European banking industry over the

next six months.

Now in its fourth edition, the latest bi-annual study consists of 184 interviews with senior bankers across 11 markets:

Austria, Belgium, France, Germany, Italy, the Netherlands, the Nordics, Poland, Spain, Switzerland and the UK.

The fieldwork was conducted via an online questionnaire and telephone interviews between September and October

.

market.

A range of bank types were interviewed in each market to ensure the study is a fair reflection of each countrys banking

industry. Interviews were not conducted with subsidiaries of member/group banks.

e resu s n s repor are presen e n an aggrega e mar e orma an s own n percen ages. ease no e, some

charts may not add up to 100% as percentages have been rounded to the nearest whole number. Where possible, we

have compared and contrasted the data against the European Banking Barometer 1H13.

We would like to thank all the research participants for their contribution to the study.

If you would like to take part in our next European Banking Barometer study, please speak to your usual EY contactor refer to your local-country contact on page 50.



4/52

Composition of the survey sample by bank type

Bank type*

3434 Universal (large-scale banking group/major bank)

Corporate and investment

Private bank/Wealth management

Specialist (e.g., consumer credit, savings, or a bank that doesnt offer a current account)

Retail and business (SME business banking)

11

10

10

* Numbers in the pie chart reflect the percentage of respondents who answered.

Please note that given the structure of the German and Swiss banking markets, respondents in these two countries were provided with country-specific bank types that have been reallocated to our five European bank types as follows:

For Germany, big banks and regional banks were reallocated to universal banks; foreign banks (not head-quartered in Germany) were reallocated to corporate and investment banks; private bankers were reallocated to private banks/wealth


managemen; savngs an s an coopera ve an s were rea oca e o re a an usness an s; an cen ra u ng soce es, u ng oan assoca ons an mor gage an s were rea oca e o speca s an s.

For Switzerland, major banks were reallocated to universal banks; investment banks were reallocated to corporate and investment banks; private bankers (general or limited partnership) and banks under foreign control were reallocated to

private banks/wealth management; cantonal banks, and regional and savings banks were reallocated to retail and business banks; and securities traders were reallocated to specialist banks.


5/52

Composition of the survey sample by bank type

Corporate and

Private bank/

Wealth

Retail and

business

Retail and

business

Retail and

business

(privately

Type of bank

ar e o a n versa nves men managemen pec a s coopera ve s a e owne owne

Austria 10 9 0 0 1 0 0 0

Belgium 16 4 0 4 1 0 1 6

France 21 7 2 2 1 1 2 6

German 41 9 3 2 2 8 15 2

Italy 18 6 3 0 2 5 0 2

Netherlands 10 2 1 1 4 0 0 2

Nordics 14 8 1 0 4 0 0 1

Poland 8 6 0 0 0 0 0 2

Spain 13 5 1 1 2 1 0 3

Switzerland 10 2 0 4 0 0 3 1

UK 23 4 10 5 2 0 1 1



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7/52


8/52

Economic environment



9/52

Uncertainty has given way to optimism, with most banks nowexpecting the economic outlook to improve

How do you expect the general economic outlook in your market to change over the next six months?*

2H13

1 8 35 53 3

4 20 50 23 2

1H13

Worsen significantly Worsen slightly Stay the same Improve slightly Improve significantly

Comments: For the first time since the launch of EYs European Banking Barometer, a majority of banks expect the economicoutlook to strengthen. This optimism reflects improving economic indicators that suggest after a protracted downturn the

recovery is taking hold across Europe. Eurozone GDP grew 0.3% in the second quarter of 2013 after a record 18 month

contraction. Furthermore, strong Purchasing Manager Index data for a number of European countries points to growth

becoming embedded. Nevertheless, as illustrated by the ECBs recent rate cut, the recovery remains weak and Eurozone GDP

is only expected to reach pre-crisis levels in 2014 or 2015, over six years after the start of the crisis.


* Numbers reflect the percentage of respondents who answered. Base excludes respondents who answered "Don't know".


10/52

Polish, Spanish and UK banks expect the greatest economicimprovement

2H13

How do you expect the general economic outlook in your market to change over the next six months?*

1H13

1 8

20

35

38

40

53

63

40

3Europe

Belgium

Austria

4 20

21

38

50

71

38

23

7

25

2Europe

Belgium

Austria

Net

increase

-13

-14

1

Net

increase

20

63

47

5

14

20

6

5

29

29

40

50

37

33

36

40

44

59

33

21Nordics

Netherlands

Italy

Germany

France

17

16

14

40

25

19

40

64

30

50

54

24

21

20

8

27

12

10

8

Nordics

Netherlands

Italy

Germany

France -36

8

-34

-10

7

-1

54

38

20

43

26

50

23

14

65

50

69

86

9

8

UK

Switzerland

Spain

Poland

'

3

3

3

8

11

10

16

15

64

55

41

46

19

31

34

31

3

6

UK

Switzerland

Spain

Poland 8

21

18

8

86

77

50

74




11/52

European sovereign debt crisis



12/52

Concerns about the exposure of the banking sector tosovereign debt are beginning to recede

What level of impact do you think the Eurozone sovereign debt crisis will have on the banking sector in your

market over the next six months compared with the previous six months?*

4 31 48 15 1

2H13

1 19 46 27 8

1H13

Significantly decreased impact Slightly decreased impact About the same Slightly increased impact Significantly increased impact

Comments: More than twice as many banks expect the impact of the Eurozone sovereign debt crisis on their banking sector to

diminish over the next six months than expect it to increase. This is a remarkable reversal of the results in the previous edition

of the Barometer, and is underpinned by a return to growth in the Eurozone and signs that countries at the heart of the crisis are

regaining competitiveness; Spanish and Greek labor costs are in steady decline, while the Spanish and Italian Governments are

now running current account surpluses.


* Numbers reflect the percentage of respondents who answered.


13/52

with all countries except Austria, France and Polandexpecting the impact of the sovereign debt crisis to diminish

What level of impact do you think the Eurozone sovereign debt crisis will have on the banking sector in your

market over the next six months compared with the previous six months?*

6 38

20

50

60

6

20

Belgium

Austria

2H13

29

13

36

63

36

13 13

Belgium

Austria

1H13Net

increase

13

7

Net

increase

0

-38

2

5

30

33

29

19

50

39

44

52

28

24

24

20Netherlands

Italy

Germany

France

8

4

40

8

19

24

30

42

54

36

30

42

22

24

5

12

Netherlands

Italy

Germany

France 8

8

26

-10

-

0

-7

-5

-10

9

15

35

30

46

56

50

23

100

20

15

UK

Switzerland

Spain

Poland

3

19

10

9

23

44

45

41

38

31

34

34

15

6

7

16

23

UK

Switzerland

Spain

Poland

-

15

41

28

18

-

0

-46

-10

-44

Significantly decreased impact Slightly decreased impact About the same Slightly increased impact Significantly increased impact




14/52

Business outlook and focus areas



15/52

European banks are more optimistic about their ownperformance than at any time in the last 18 months

How do you expect your banks overall performance to change over the next six months?*

2H13

1 11 28 51 9

2 14 31 46 8

1H13

Weaken significantly Weaken slightly Stay the same Strengthen slightly Strengthen significantly

Comments: The de ree to which res ondents ex ect their banks erformance to stren then reflects both the im rovin

economic outlook and a generally healthier banking sector. Despite lingering concerns about the Eurozone sovereign debt crisisand the US debt ceiling, the macro-economic outlook is more stable. Additionally, most banks have made progress improving

the quality of their balance sheet. Regulation and the drive to reduce leverage have led banks to dispose of, or reduce exposure

to, non-core assets and businesses, and many institutions are beginning to look for opportunities to grow revenues. Dutchbanks have the most improved outlook, while only German banks are more pessimistic about their performance than in 1H13.

This pessimism may, in part, be driven by capital regulation. Historically German banks have held a higher level of hybrid capital

than their European counterparts, but this will no longer be possible under Basel III.




16/52

Only German respondents expect their banks overallperformance to deteriorate

How do you expect your banks overall performance to change over the next six months?*

Europe

Belgium

Austria 1H13

2H13

3.503.38

3.36 3.63

3.43 3.56

Italy

Germany

France..

3.15

3.613.25

2.90 3.80

2.93

Spain

Poland

Nordics3.93 4.07

2.92 3.25

3.813.54

1 2 3 4 5

UK

Switzerland

Weaken

significantly

Strengthen

significantly

. .

3.89 3.91

Stay the same


* Numbers reflect the mean scores of respondents who answered on a scale of 1 to 5 where 1 denotes Weaken significantly and 5 denotes Strengthen significantly.


17/52

With the Asset Quality Review looming, one-third of banksexpect to increase loan loss provisions

Over the next six months, what do you expect your banks total provisions against loan losses to do?*

2H13

1 12 54 26 8

3 12 53 28 4

1H13

Decrease significantly Decrease slightly Stay the same Increase slightly Increase significantly

Comments: Despite improving economic indicators, many European banks expect to increase loan loss provisions (LLPs) inthe next six months. This is unsurprising; the ECBs Asset Quality Review (AQR) which will stress test bank balance sheets

will be based on 2013 year-end data. As a result Eurozone banks are likely to increase provisions for potentially troublesome

loans in Q4. While Spanish and Italian banks expect the greatest increase in LLPs, UK banks, which are not subject to the AQR,generally expect LLPs to decrease.




18/52

Spanish and Italian banks are most likely to increase theirloan loss provisions in the next six months

Over the next six months, what do you expect your banks total provisions against loan losses to do?*

Europe

Belgium

Austria3.503.25

3.14 3.25

3.19 3.27

3.333.24

1H13

2H13

Netherlands

Italy

Germany

France

3.14

3.613.33

2.90 3.50

Spain

Poland

Nordics2.71 3.00

3.313.00

3.63 3.77

3.10

1 2 3 4 5

UK

Switzerland3.112.87

Decrease

significantly

Increase

significantlyStay the same


* Numbers reflect the mean scores of respondents who answered on a scale of 1 to 5 where 1 denotes Decrease significantly and 5 denotes Increase significantly.


19/52

Lending prospects will improve for most sectors

How do you expect the corporate lending policies of banks in your market to change in each of the following

sectors over the next six months?*

2H131H13

11

20

40

50

16

21

35

33

Healthcare

SMEs

Net less

restrictive

Net less

restrictive

12

19

30

29

20

11

12

19

11

26

27

27

28

34

25

19

22

21

21

24

25

21

25

28

Retail and consumer products**

Information technology

Commercial and professional services**

Media and telecommunications

Manufacturing and industrials (incl. chemicals, eng.)**

nergy, mn ng an m neras -15

7

4

-1

6-1

14

23

9

15

166

29

26

30

37

17

17

19

23

More restrictive Less restrictive

38

37

49

51

16

10

18

16

Transport (incl. automotive and shipping)**

Financial services

Construction

Commercial real estate -35

-31

-27

-22

-14

-11

-9

-12

Comments: Since our previous Barometer, and despite one third of banks expecting to increase loan loss provisions, the outlook forlending has improved across most sectors. However, lending to a few sectors, including construction and commercial real estate will

continue to tighten. The small and medium sized enterprise (SME) sector is expected to see the greatest loosening of lending policies.SMEs are benefitting from both the improving economic environment and the efforts of national governments and the European

Investment Bank (EIB) to boost lending to the sector. The UK, which is not subject to the Asset Quality Review and is the second most

optimistic country about economic growth, is the only market where lending is expected to be less restrictive for all sectors.


* Numbers reflect the percentage of respondents who answered. Respondents answering Stay the same are not displayed. Base excludes respondents who answered "Don't know".

** Energy and mining includes minerals, Manufacturing includes industries, chemicals and engineering, Commercial services includes professional services, Retail includes consumer products and Transport includes automotive and shipping.


20/52

although lending policies for construction and commercialreal estate will continue to be restricted in all countries



29

7

13

21

50

12

41

40

27

21

21

41

Austria Belgium France

29

14

43

14

29

29

43

71

29

43

43

28

SMEs

HealthcareEnergy and mining**

Manufacturing**

Media and telecomms

Commercial services** 33

22

50

33

11

30

22

33

10

11

22

20

43

60

40

29

53

33

7

13

20

12

Germany Italy Netherlands

14

14

57

57

71

71

43

29

29

14

14

14


Retail**

Commercial real estate

Construction

Financial services

Transport** 30

22

13

22

11

10

40

33

13

22

11

10

12

13

36

4

18

13

12

66

38

36

41

21

26

20

SMEs

Healthcare

Energy and mining**

Manufacturing**

Media and telecomms

Commercial services**


**

25

17

8

23

15

27

8

67

50

50

38

38

27

25

25

67

33

50

33

33

33

33

24

15

35

18

29

22

11

18

Commercial real estateConstruction

Financial services

Transport**

53

54

14

38

23

23

21

31

50

66

67

25

33

50

33






21/52

except the UK, where banks expect to loosen lendingrestrictions across all sectors



Nordics Poland Spain

20

1030

10

10

10

60

5020

40

30

50

1720

20

20

67

40

20

25

38

13

26

14

25

5076

38

38

14

SMEs

HealthcareEnergy and mining**

Manufacturing**

Media and telecomms


Switzerland UK

20

10

80

80

30

20

40

50

10

30

17

14

40

50

33

29

29

25

13

13

43

25

13

25

25

14


Retail**

Commercial real estate

Construction

Financial services

Transport**

20

10

10

10

10

30

30

30

30

30

SMEs

Healthcare

Energy and mining**

Manufacturing**

Media and telecomms



**

8

8

8

8

8

46

46

38

39

46

31

39

39

30

20

20

10

Commercial real estateConstruction

Financial services

Transport**

88

20

8

5330

40

39






22/52

European banks are beginning to shift their focus frombalance sheet stabilization to growing new revenues

Introducing/Increasing incentives to increase customer deposits

How likely are the banks in your market to be engaged in the following activities over the next six months?*

3.543.39

1H13

Repaying central bank funding programs

Launching initiatives to promote growth

Seeking funding from wholesale capital markets

3.28 3.49

3.31 3.48

3.363.18

3.00 3.31

2H13

Reducing the balance sheet

Selling assets outside home markets

Selling assets outside Europe

3.29 3.42

3.14 3.27

3.06 3.22

3.353.20

1 2 3 4 5

Reducing loan to deposit ratios

Accessing central bank funding programs

..

2.852.69

Significantly

less

Significantly

moreStay the same

Comments:A more stable economic environment and continued low funding rates have helped banks to strengthen theirbalance sheets and reduce their dependence on central bank funding programs. Average ECB funding for Eurozone banks is

now just 2.5% of bank assets and with potential penalties for excessive LTRO usage in the AQR, 51% are planning to repaycentral bank funding in the next six months. Many banks also expect to sell assets outside their core markets to boost capital

and liquidity. With healthier balance sheets banks are beginning to focus on revenue growth. Fifty percent of banks anticipate

launching specific initiatives to promote growth in the next six months and 45% expect to increase lending to customers. Forty-

four ercent of banks ex ect to increase fundin from wholesale markets to su ort this rowth.


* Numbers reflect the mean scores of respondents who answered on a scale of 1 to 5 where 1 denotes Significantly less and 5 denotes Significantly more.


23/52

Most banks in all countries, except France, anticipatereducing access to central bank funding programs

Austria Belgium France


30

20

10

20

10

10

10

50

50

30

40

50

40

10

20

10

10

10

10







38

44

63

19

50

25

19

25

13

13

25

13

25

19

13

6

10

10

19

5

5

48

62

24

48

62

48

5

5

5

19

5

Germany Italy Netherlands

50

30

10

10

10

10

40

60

10

10


Lending to customers


Selling assets outside home market

6

38

38

25

6

6

6

6

50

19

19

13

13

13

6

24

24

5

24

19

29

53

5

5

10

10

10

1010

50

70

40

40

10

20

30

10

10

10

6

11

6

6

6

11

6

28

39

61

33

50

33

11

6

11

11

15

30

37

37

38

5

3

8

29

10

10

15

15

3

2

2

5






e uc n g t e a a nce s eet

40

40

20

20

10

10

30

30 10

39

22

66

17

56

44 11

20

50

18

5

3

25

8

10

3

10




e ng asse s ou s e ome mar e

Significantly moreSlightly moreSignificantly less Slightly less


* Numbers reflect the percentage of respondents who answered. Respondents answering About the same are not displayed.


24/52

A majority of banks in all countries also expect to increaseinitiatives to promote growth



8

31

1515

62

54

69

62

54

38

15

15

23

8

25

63

63

63

25

25 13

21

7

21

29

7

7

7

14

36

36

21

36

36

7

7

7







Switzerland UK

23

15

8

8 15

46

54

62

15

8

8

8

13

13

13

13

88

36

21

14

14

43

7

7

57

14

21





13

13

9

26

4

26

4 39

39

52

22

39

35

9

9

9

4

13

9

20

10

10

40

30

40

40

60

20

10







39

4

9

9

9

4

4

9

52

43

48

4

4

50

20

10

10

10 10

10

30

70

10

20

10





Significantly moreSlightly moreSignificantly less Slightly less


* Numbers reflect the percentage of respondents who answered. Respondents answering About the same are not displayed.


25/52

Banks will continue to adjust their footprints

Which, if any, of the following is your bank likely to consider over the next six months in relation to the countries

in which it operates?*

32

4144

25

19

27 27

23

Sell assets Buy assets Partnerships orjoint ventures

None of these

1H13 2H13

Comments: Since the crisis, many banks have sold assets as they have restructured their businesses to reduce complexity or

raise capital. This reshaping of the banking sector is set to continue, with 56% of the respondents expecting to either buy or sell

assets, or enter a joint venture in the next six months. Banks remain focused on getting their European footprint right and 91%

of banks anticipating asset purchases and 86% of banks anticipating asset sales or joint ventures, expect these to occur within

the European market.


* Numbers reflect the percentage of respondents who answered. Respondents could select more than one option.


26/52

with the majority of sales, acquisitions and joint venturesexpected in European markets

In which regions is your bank likely to sell assets / buy assets / consider joint ventures in over the next six

months?*Europe

5

4

Sell assets

Buy assets

North America

7

5

Sell assets

Buy assets

Asia Pacific

31

36

41

Joint ventures

Sell assets

Buy assets

1

0 5 10

Joint ventures

5

0 5 10

Joint ventures0 10 20 30 40 50

South America 2Buy assets

Middle East

Across the world

2

1

2

Joint ventures

Sell assets

Buy assets

1

2

0 1 2 3 4

Joint ventures

Sell assets

0

4

5

Joint ventures

Sell assets

Buy assets

0 5 10 0 5 10


* Numbers represent the total number of mentions for that particular region. Respondents could state more than one region.


27/52

Swiss banks are now significantly more likely to sell assets,while French banks are significantly more likely to buy assets

Which, if any, of the following is your bank likely to consider over the next six months in relation to the countries

in which it operates?*

Sell assets Buy assets Partnerships or joint ventures None of these

21

25

27

31

40

Euro e

Belgium

Austria

21

0

27

38

10

7

0

23

13

10

50

75

44

38

50

50

29

36

39

17

43

Italy

Germany

France

0

20

20

25

11

15

57

42

7

36

19

28

15

24

17

61

28

41

50

63

19

53

15

43

30

38

0

0

Spain

Poland

Nordics

e er an s

31

38

29

20

15

13

21

16

8

36

20

46

25

14

16

54

43

50

23

63

71

31

17

35

40

UK

Switzerland

42

24

43

30

2H13 1H13

25

28

30

20

28

41

22

40


* Numbers reflect the percentage of respondents who answered. Respondents could select more than one option.


28/52

Most banks anticipate consolidation within the industry inboth the short and medium term.

To what extent do you anticipate consolidation of the banking industry over the next 12 months and within

the next three years?*

Within three years12 months

6

27

12

14

43

31

I do not anticipate any consolidation Small-scale consolidation Medium-scale consolidation Large-scale consolidation

41

Comments:Although 73% of banks anticipate some consolidation in the industry over the next 12 months, most expect this willbe small scale. Despite the significant strides banks have made in strengthening their balance sheets, the economic recovery is

not yet assured and institutions remain cautious about major acquisitions in the short term. However, over the next three years

55% of the respondents expect medium- or large-scale consolidation. Switzerland is most likely to see consolidation in both the

short and medium term, with all the respondents anticipating some consolidation, and 90% expecting medium- or large-scale

consolidation. Swiss private banks have been struggling with declining profitability due to increased compliance and IT costs,

as well as revenue pressure following recent bilateral tax agreements with Germany and the UK.




29/52

Swiss banks anticipate the greatest degree of consolidation

To what extent do you anticipate consolidation of the banking industry in your market over the next 12 months

and within the next three years?*

Austria Belgium Europe

10

20

40

70

40

10

10

3 years

12 months

6

56

44

25

38

13

13

6

14

27

31

41

43

26

12

6

France

10

10

14

57

62

29

14

5

Germany Netherlands Nordics

50

70

30

20

20

10 31

50

31

43

31 8

7

Italy

6

22

22

50

67

28

632

17

32

51

32

27

4

5

3 years

12 months

23 31 46

SwitzerlandPoland UKSpain

13 13 7512 months 48 48 410 40 50

42 17 42

I do not anticipate any consolidation Small-scale consolidation Medium-scale consolidation Large-scale consolidation

25 63 133 years 30 35 3510 40 50




30/52

Business priorities and product lineex ectations



31/52

Regulatory compliance and risk management remain themost important agenda items for European banks

73Preparing for Basel III/CRD IV

Rank the importance of the following agenda items for your organization*

1H13

3

2H13

1

Rank order of importance

46

4849

60

45

49

55

41Investin in customer-facin technolo

Cutting costs

Reputational risk

Compliance with capital market regulationsCompliance with consumer regulation/remediation

Minimizing non-essential expenditure

Streamlining processes

Risk management 1

2

4

67

-

5

2

3

4

56

7

8

23

23

27

37

26

18

25

-

Establishing new business segments

New remuneration systems

Restructuring the business to comply with regulations

Developing/Introducing new products

Restructuring the business to cut costs

Developing Recovery and Resolution Plans

Current changes in financial reporting/IFRS

11

12

9

10

14

18

13

10

11

12

13

14

15

16

8

12

12

14

14

15

Reducing the number of products

Off-shoring

Outsourcing

Disposing of assets or businesses

New foreign markets/Internationalization

Acquiring new assets or businesses

Innovation and growth

Cost cutting and efficiency

Risk and regulation

19

16

17

20

22

21

18

19

20

21

22

23

*

Comments: Despite signs that banks are beginning to look for ways to grow revenues, risk, regulation and efficiency remain the

top agenda items for European banks. Perhaps not surprisingly, given the greater clarity now that CRD IV has been agreed,

preparing for Basel III is now the most important agenda item for banks it was ranked third in our previous Barometer. More

notably, tactical cost cutting has fallen out of the top five priorities for banks, to be replaced by compliance with consumer

regulation and remediation. This is now a key agenda item for banks in countries that have faced mis-selling scandals, including

the UK and Spain, with regulators placing an increased emphasis on consumer protection.


espon ens were as e o ran e mporance o ac v es on a scae o o , w ere eno es o a a mporan an eno es very mporan . um ers s ow e percenage o respon ens se ec ng e er , or . ase

excludes respondents answering Does not apply.

Reputational risk includes tax transparency. Compliance with capital markets regulations i.e., MiFID II/EMIR. Investing in new customer-facing technology e.g., mobile solutions.


32/52


33/52


34/52

Banks anticipate an improved outlook for all business lines

How do you rate the outlook for your bank over the next six months in each of the following business lines?*

2H131H13

10

7

6

1

3

1

45

45

46

6

8

14

Corporate banking

Retail banking

Private banking and wealth management

32

36

35

11

11

11

13

10

13

2

4

3

Corporate banking

Retail banking


Net

increase

30

33

28

Net

increase

53

43

40

20

9

10

12

1

1

1

1

32

36

38

43

9

5

10

8

Transaction advisory (e.g., M&A)

Securities services

Asset management

Deposit business

22

34

37

41

4

4

13

11

16

16

18

14

5

2

3

2

Transaction advisor e. . M&A

Securities services

Asset management

Deposit business 36

29

20

5

38

37

31

20

14

14

1

3

30

32

5

7

Securities trading

Debt and equity issuance

26

28

4

9

21

14

4

8

Securities trading

Debt and equity issuance 15

5

22

20

Very goodFairly goodVery poor Fairly poor

Comments: Banks are most optimistic about the outlook for private banking and wealth management, which is particularly attractivegiven its capital-lite business model. With global markets having rebounded since 2009, the wealth of high and ultra high net worth

individuals has seen a dramatic recovery - the wealth of EU27 billionaires has almost doubled since then and grew around 23% in the

last year alone. However, this optimism may be more due to hope than expectation. With banks competing over a relatively small

customer pool not everyone can be a winner. Banks also expect an improved outlook for retail and corporate banking. With signs of

an economic recovery in Europe, banks are hopeful that both businesses and individuals will look to borrow and invest. Only the

Dutch banks do not ex ect an im roved outlook for retail and cor orate bankin .


* Numbers reflect the percentage of respondents who answered. Respondents answering Neither good, nor poor are not displayed.

.

ith th t t f t d i t il b ki


35/52

with the strongest performance expected in retail banking,wealth management


Retail bankingPrivate banking and Wealth management

14

13

5

7

8

29

3

11

14

53

51

35

45

42

33

7

5

6

8

17

Netherlands

Italy

Germany

France

Europe

Belgium

Austria

29

50

48

47

46

42

13

29

7

8

5

14

42

25

14

3

5

6

13

14

1

Netherlands

Italy

Germany

France

Europe

Belgium

Austria

6

22

13

13

6

8

47

22

50

50

63

12

11

17

13

13

UK

Switzerland

Spain

Poland

Nordics

60

60

45

50

38

10

10

18

17

25

5

30

17

13

5UK

Switzerland

Spain

Poland

Nordics

Deposit businessCorporate banking

53

33

45

43

43

67

10

10

8

14

67

13

15

15

12

7

1

11

Netherlands

Italy

Germany

France

Europe

Belgium

Austria

36

39

38

45

27

40

17

6

27

10

17

14

12

14

10

18

10

2

1

Netherlands

Italy

Germany

France

Europe

Belgium

Austria

44

33

45

63

60

17

18

6

13

10

UK

Switzerland

Spain

Poland

Nordics


52

44

64

100

73

10

11

9

5

9

5UK

Switzerland

Spain

Poland

Nordics



d t t Th tl k h l i d f


36/52

and asset management. The outlook has also improved forcorporate and investment banking


Securities servicesAsset management

80

53

33

30

36

25

38

5

25

13

7

18

15

9

20

1

Netherlands

Italy

Germany

France

Europe

Belgium

Austria

29

38

23

33

38

54

10

29

13

5

10

31

10

29

10

14

10

20

14

1

Netherlands

Italy

Germany

France

Europe

Belgium

Austria

47

20

45

25

25

13

10

25

10

25

UK

Switzerland

Spain

Poland

Nordics

Debt and equity issuance

56

44

58

67

42

11

17

33

8

22

25

6UK

Switzerland

Spain

Poland

Nordics

Transaction advisory

25

22

29

20

22

43

1

25

54

22

29

32

33

25

15

3

6

9

11

14

Netherlands

Italy

Germany

France

Europe

Belgium

Austria

14

19

20

13

14

11

25

9

3

57

31

14

38

32

56

25

14

13

7

13

Netherlands

Italy

Germany

France

Europe

Belgium

Austria

13

20

30

11

10

31

50

30

50

44

13

10

25

11

UK

Switzerland

Spain

Poland

Nordics

22

8

14

11

53

11

25

57

33

6

11

33

UK

Switzerland

Spain

Poland

Nordics




i di ti h th t th i b


37/52

indicating a hope that, as the economic recovery becomesembedded, businesses will be more willing to invest


Securities trading

50

38

26

18

30

25

25

17

12

5

13

13

13

29

14

13

25

17

1

Netherlands

Italy

Germany

France

Europe

Belgium

Austria


28

10

50

43

36

11

10

14

17

10

14

9

UK

Switzerland

Spain

Poland

Nordics



Customer demand for investments and lending is expected to


38/52

Customer demand for investments and lending is expected toovertake demand for deposits and savings

How do you expect customer demand for retail products at your bank to change over the next six months?*

2H131H13

71 50 8Personal investment products37 7143Personal investment products

Net

increase

27

Net

increase

50

12

9

1

1

46

46

5

5

Personal savings and deposits

Personal loans

44

32

6

3

16

19

1

5

Personal savings and deposits

Personal loans

11

33

41

38

61 36 1Credit cards28 4102Credit cards 20 30

Increase significantlyIncrease slightlyDecrease significantly Decrease slightly

,

investment products. Banks expect savers will move their savings out of cash in an attempt to generate greater returns in anegative real interest rate environment. Banks also anticipate increased demand for both secured and unsecured lending. A

significant majority of banks in all countries except Austria expect increased demand for personal loans. Ultra-low interest rates

have enabled retail customers to pay down debt and improve their personal balance sheets. With indications of an improvingeconomy, banks believe that these customers will now be more willing to borrow for consumption. Views on real-estate lending

are more polarized, suggesting that the recovery of the European housing market is far from assured. Only in the UK, where the


* Numbers reflect the percentage of respondents who answered. Respondents answering Stay the same are not displayed. Base excludes respondents answering Not applicable.

, .

Banks expect demand for deposits and savings products to


39/52

Banks expect demand for deposits and savings products toremain high, but increased demand for a range of credit


Personal real estate loansPersonal investment products

21

8

7

13

1

67

57

53

37

50

64

50

17

3

5

8

29

Netherlands

Italy

GermanyFrance

Europe

Belgium

Austria

60

46

55

56

50

31

50

5

5

15

40

8

3

17

14

23

25

3

6

2

Netherlands

Italy

Germany

France

Europe

Belgium

Austria

11

9

13

11

22

33

45

75

50

11

18

13

13

UK

Switzerland

Spain

Poland

Nordics

Personal savings and deposit products

40

44

55

75

29

30

22

27

43

13

UK

Switzerland

Spain

Poland

Nordics

Personal loans

33

57

29

72

46

40

38

17

5

5

7

17

36

21

12

13

13

6

1

13

Netherlands

Italy

Germany

France

Europe

Belgium

Austria

50

46

38

56

46

57

38

17

11

5

14

13

17

15

5

6

9

7

38

3

6

1

Netherlands

Italy

Germany

France

Europe

Belgium

Austria

60

33

55

50

63

27

13

UK

Switzerland

Spain

Poland

Nordics

70

11

45

75

25

9

11

9

13

UK

Switzerland

Spain

Poland

Nordics




suggests customers are now more willing to spend for


40/52

suggests customers are now more willing to spend forpersonal consumption


Credit cards

14

11

6

9

13

1

75

50

2639

36

36

38

6

1

Netherlands

Italy

GermanyFrance

Europe

Belgium

Austria

13

22

11

55

50

43

9

UK

Switzerland

Spain

Poland

or cs




Banks anticipate strong growth in corporate lending and debt


41/52

Banks anticipate strong growth in corporate lending and debtissuance as corporations look to increase capital expenditure

How do you expect demand for corporate products at your bank to change over the next six months?*

2H131H13Net

increase

28

Net

increase

54

10

6

2 37

52

5

8

Debt issuance

Corporate loans

41

39

6

5

14

14

5

2

Debt issuance

Corporate loans

2

12

23

1214

13

6

1

28

30

4

7

Hedging products

M&A advisory

29

24

5

2

18

15

4

9

Hedging products

M&A advisory

-10 8

Increase significantlyIncrease slightlyDecrease significantly

163 20 7Equity issuance/IPOs16 3209Equity issuance/IPOs

Decrease slightly

Comments: Improvement in the Composite European Purchasing Managers Index, which tracks projected spending andproduction levels, suggests that European corporations will increase their capital expenditure, driving demand for financing in

the coming months. The precise shape of demand for funding will vary across Europe. While most businesses remain

dependent on bank loans, respondents in some countries, such as the UK and the Nordics, expect the increase in demand for

debt and equity issuance to outstrip that for corporate lending. This suggests that there may be a structural shift towards a US

funding model, which places greater reliance on the financial markets.



Corporate lending still dominates financing for European


42/52

Corporate lending still dominates financing for Europeanbusinesses. However increased demand for debt


Corporate loans Debt issuance

50

57

21

36

37

43

33

7

5

11

24

10

29

3

2

Netherlands

Italy

Germany

France

Europe

Belgium

Austria

25

50

5559

52

88

44

512

8

13

7

6

6

33

Netherlands

Italy

GermanyFrance

Europe

Belgium

Austria

53

33

30

43

44

13

14

22

7

11

10

11

UK

Switzerland

Spain

Poland

Nordics

41

22

70

57

44

18

10

29

11

6

11

20

UK

Switzerland

Spain

Poland

Nordics

M&A advisory Hedging products

8

20

6

14

14

8

11

6

33

31

14

19

28

14

38

33

13

4

13

Netherlands

Italy

Germany

France

Europe

Belgium

Austria

33

8

43

30

67

50

3

14

7

14

50

22

14

13

14

3

1

Netherlands

Italy

Germany

France

Europe

Belgium

Austria

11

38

30

11

6

13

10

44

13

40

57

33

6

14

UK

Switzerland

Spain

Poland

Nordics

54

33

33

50

158

11

22

UK

Switzerland

Spain

Poland

or cs




and equity financing in the UK Italy and the Nordics


43/52

and equity financing in the UK, Italy and the Nordicssuggests a shift towards greater reliance on market funding


Equity issuance/IPOs

8

3214

16

13

17

8

3

3

31

614

20

13

17

8

14

7

13

Netherlands

Italy

GermanyFrance

Europe

Belgium

Austria

7

13

11

20

13

20

20

25

22

20

67

20

11

UK

Switzerland

Spain

Poland

Nordics




Headcount


44/52

Headcount


Ongoing industry restructuring and a focus on efficiency will


45/52

Ongoing industry restructuring and a focus on efficiency willlead to further job cuts across the sector

Over the next six months, how do you expect the headcount of your bank to change?*

2H13 23 23410

1H13 20 3329


Comments: European banks remain divided on headcount changes. Banks in countries such as Austria, Poland, Spain andSwitzerland, which are still going through significant restructuring, anticipate the greatest headcount reductions. In some

markets that are further along with their restructuring, such as the Netherlands, the Nordics and the UK, banks actually expect

to increase headcount. However, even in these countries the picture varies widely from bank to bank.


* Numbers reflect the percentage of respondents who answered. Respondents answering Stay the same are not displayed. Base excludes respondents answering "Don't know".

but banks in the Netherlands, the Nordics and the UK now


46/52

,anticipate overall headcount growth

Over the next six months, how do you expect the headcount of your bank to change?*

2H131H13

34

25

40

10

13

20

23

31

10

2

6

Europe

Belgium

Austria -50

-1

-1932

43

63

9

13

20

13

3Europe

Belgium

Austria

Net

increase

-63

-43

-18

Net

increase

21

30

44

24

7

10

6

12

43

40

28

12

10

2

Nordics

Netherlands

Italy

Germany

rance -

-22

-22

10

1557

20

58

24

7

20

8

8

7

30

17

17

7Nordics

Netherlands

Italy

Germany

rance -

-15

-49

-10

-50

26

50

31

4

23

35

20

15

4UK

Switzerland

Spain

-

-39

-30

931

14

28

14

3

9

25

28

31

6

9

UK

Switzerland

Spain

-

3

11

-14

Increase si nificantlIncrease sli htlDecrease si nificantl Decrease sli htl


* Numbers reflect the percentage of respondents who answered. Respondents answering Stay the same are not displayed. Base excludes respondents answering "Don't know".

Headcount will remain stable in growth sectors such as


47/52

gprivate banking and asset management

In which areas of the business do you expect headcount to increase or decrease?*

2H131H13

11

12

13

11

36

13

10

12

11

22

8

Asset management

Retail and business banking

Private banking and wealth management** 3

-10

10

Net

increase

Net

increase

0

-24

0

7

8

9

10

2

9

10

17

10

4

13

6

13

3

15

16

Other

Compliance, risk and finance

Corporate banking

Investment banking -10

-2

1

-3

-7

-1

-1

5

4

5

30

33

2

3

22

21

Other head office functions

Operations and IT

Decrease Increase

-18

-20

-28

-26

Comments: Redundancies will be focused on head office functions, including operations and IT, as banks continue to

streamline processes and improve efficiency. Headcount will be largely unchanged in growth businesses such as private

banking and asset management. However in retail banking, despite expectations of growth, headcount is still expected to fall

as banks rationalize branches following mergers and the focus on efficiency and automation of branch activity continues apace.


* Numbers reflect the percentage of respondents who answered. Base excludes respondents answering that headcount would Stay the same.


48/52

particularly in Poland and Spain


49/52

In which areas of the business do you expect headcount to increase or decrease?*


1020

30

10

20

1010

20

20

Corporate banking

Investment bankingAsset management



13

50

13

25

11

2211

67

11

11

11

11

30

20

10

10


Operations and IT

Other

Compliance, risk and finance

63

50

78

22

11

25

6

31

19

31

13

6

13

14

43

29

29

14

29

Investment banking

Asset management



19

25

19

14

43

1414


Operations and IT

OtherCompliance, risk and finance


* Numbers reflect the percentage of respondents who answered. Base excludes respondents answering that headcount would Stay the same.

Contacts


50/52


Contacts


51/52

For more information on how we can help, please contact our team.

EMEIA: France: Nordics: Switzerland:

Robert Cubbage

+44 20 7951 2319

[email protected]

Steven Lewis

+44 20 7951 9471

Luc Valverde

+33 1 46 93 63 04

[email protected]

Germany:

Lars Weigl

+46 8 520 590 45

[email protected]

Poland:

Philippe Zimmermann

+41 58 286 32 19

[email protected]

UK:

[email protected]

Austria:

Dirk Mller-Tronnier

+49 6196 996 27429

[email protected]

Italy:

Iwona Kozera

+48 22 557 7491

[email protected]

Spain:

Omar Ali

+44 20 7951 1789

[email protected]

+43 1 21170 1352

[email protected]

Belgium:

Jean-Fran ois Hubin

+39 02 7221 2306

[email protected]

Netherlands:

Wouter Smit

+34 91 572 7291

[email protected]

+32 2 774 9266

[email protected]

+31 88 407 1574

[email protected]


EY | Assurance | Tax | Transactions | Advisory


52/52

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