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The Outlook for Retail Banking in Europe and the US: The impact of the financial crisis on competitive positioning and market development

Published by: Business Insights

Published: Jun. 1, 2009 - 134 Pages


Table of Contents


The Outlook for Retail Banking in Europe and the US Executive summary
Introduction
Current market position
Competitive dynamics
Competitive benchmarking
Legislation & regulation
The outlook for 2009-2010
Chapter 1 Introduction
What is this report about?
Methodology
Chapter 2 Current market position
Summary
Introduction
The origins of the Financial Crisis
Financial Crisis Timeline: 2007-2009
1. US Sub-Prime Crisis & the start of the 2007 Credit Crunch
2. An attempt at recovery
3. The first big losses
4. The start of the 2008 Global Financial Crisis
5. The banks begin to fall
6. Black September
7. Rescue Plans
8. A Financial Crisis becomes an Economic Crisis
9. The New Year brings no relief
The continuing risk
The retail banking market as of Q1 2009
Public trust has suffered
Uncertainty characterizes the market
The retail banking market has contracted
Chapter 3 Competitive dynamics
Summary
Introduction
Change in leading retail bank rankings
Market share increases of the top ten global banks
HSBC dominates retail banking in 2009 when compared by total revenue
European banks dominate when compared by total net income
Bank of America earned the highest revenue from retail sales in 2009
BBVA saw the highest net income from retail sales in 2009
Other performance ranking metrics
HSBC comes first in terms of Brand Value
German banks dominate when ranked by safety
Chapter 4 Competitive benchmarking
Summary
Introduction
Key performance indicators in the global retail market
HSBC
Summary
Recent activity
Financial strength
Performance analysis
Risk analysis
SWOT
Bank of America
Summary
Recent activity
Financial strength
Performance analysis
Risk analysis
SWOT
JP Morgan Chase
Summary
Recent activity
Financial strength
Performance analysis
Risk analysis
SWOT
Citigroup
Summary
Recent activity
Financial strength
Performance analysis
Risk analysis
SWOT
Banco Santander
Summary
Recent activity
Financial strength
Performance analysis
Risk analysis
SWOT
Consolidated performance matrix
Consolidated risk matrix
Shifting regional and competitive dominance
US banks face growing fears of nationalization
The “Bad Bank” strategy is growing more popular
Bank of America and Citigroup are unlikely to survive intact
JP Morgan Chase and Wells Fargo are the best-placed US banks in 2009
Canadian banks are growing increasingly dominant
European banks face a worrying capital deficit
UK banks are losing their autonomy
Nationalization has permanently altered the UK banking landscape
Organic diversification is preferable to acquisition
Chapter 5 Legislation & regulation
Summary
Introduction
The current banking model is under debate
Balance sheet versus securitization intermediation
Should retail and investment banking activities be separated?
Expansionist policies are a priority
Short term goals are needed to limit impact of crisis
Long term goals must be implemented to prevent future crises
Lessons can be learned from past mistakes
The Swedish banking crisis offers valuable lessons
Japan failed to act swiftly enough to prevent its own crisis
Are we learning from their mistakes?
Regulation must centralize
An idiosyncratic approach is no longer practicable
Greater sectoral analysis is needed
Fragmented European approach must be made into unified front
France and Germany call for stringent regulation while UK and US push for fiscal stimulus
G20 vetoes international regulator
A new Financial Stability Board will monitor cross-border consistency
Regulation of the financial industry will be extended
New legislation may impact banks’ ability to function
Free market vs. state intervention
Strict capital & liquidity requirements will restrict banking activity
Compensation will be more tightly controlled
Operational challenges creating an open playing field
The US will no longer dominate retail banking
Key legislation
Selected Government intervention as a result of the 2008 crisis
The US Financial Stability Plan
The UK Banking Act 2009
Economic Recovery Plan
Chapter 6 The outlook for 2009-2010
Summary
Introduction
Forecast for economic growth in 2009-2010
World growth is expected to decline
The retail sector is now having an adverse effect on banks
Governments will continue providing fiscal stimulus through 2010
Key risks facing the banking industry
Banks must update their business models to survive
New criteria for success
Consolidation may hold hidden dangers
Smaller banks may have a strategic advantage
The road lies open for new enterprise
Multinational scope of banking may reduce
Long-term implications for the retail banking industry
Risk is vital in predicting future performance
Regulation will have the biggest impact on retail banking in 2009-2010
Chapter 7 Appendix
Research methodology
Retail Revenue & Net income Data, Chapter Two
Consolidated performance & risk matrices, Chapter 4
Exchange Rates
Glossary
Index
List of Figures
Figure 2.1: Retail banking market value 2007 compared to 2009 ($bn)
Figure 3.2: Change in leading retail bank rankings, 2008 and 2009
Figure 3.3: Top ten global retail banks by total revenue ($bn), 2007 and 2008
Figure 3.4: Top ten retail banking brands 2009 (brand value in $bn)
Figure 4.5: HSBC SWOT analysis
Figure 4.6: Bank of America SWOT
Figure 4.7: JP Morgan Chase SWOT
Figure 4.8: Citigroup SWOT
Figure 4.9: Banco Santander SWOT
List of Tables
Table 2.1: Top ten worldwide banks by market capitalization at Jan 15th 2009
Table 3.2: Top ten global retail banks by market share, 2008
Table 3.3: Top ten global banks by market share, 2009 (estimated)
Table 3.4: Leading global retail banks by total net income ($bn), 2009
Table 3.5: Global banks by retail revenue ($bn), 2009
Table 3.6: Global banks by net income from retail segments ($bn), 2007 and 2008
Table 3.7: Top ten safest banks in the world, 2009
Table 4.8: HSBC summary
Table 4.9: Bank of America summary
Table 4.10: JP Morgan Chase Summary
Table 4.11: Citigroup Summary
Table 4.12: Banco Santander summary
Table 4.13: Consolidated performance matrix of top ten global retail banks by revenue
Table 4.14: Consolidated risk matrix of top ten global retail banks by revenue
Table 7.15: Business segments by bank
Table 7.16: Exchange rates used in this report

Abstract

The Outlook for Retail Banking in Europe and the US

The impact of the financial crisis on competitive positioning and market development

Report Overview

Global financial markets have suffered a serious impact from the financial crisis and economic recession. Only a few banks have escaped unscathed as the retail banking industry continues to adjust to shifts in the global financial and economic environment. The impact of these changes will drastically alter the retail banking landscape, with updated and coordinated international regulation, higher risk, capital shortages and a potential legislative separation of the retail and investment banking sectors.

‘The Outlook for Retail Banking in Europe and the US’ is a report published by Business Insights that examines the impact of the financial crisis on the retail banking market in Europe and the US. It analyzes the current state of the sector, with an in-depth evaluation of the retail banking industry. Leading retail banks are assessed and ranked based on a variety of factors to compare performance, with key factors contributing to risk profiles and performance potential also provided. The report examines the influence of government intervention and explores the potential impact of future legislation upon the industry. It identifies the future implications for the retail banking market in Europe and the US in the next year and assesses emerging business models and corporate strategies for the future.

Key Findings

HSBC dominates the retail banking market in 2009, when assessed by total revenue. Citigroup’s total revenues have fallen by almost 40%, while Bank of America experienced a year-on-year increase of 10.8%.

The US is likely to lose its dominance of the retail banking market, while European banks are growing in stature and are better placed to take advantage of opportunities in 2009. However, concerns are rising in the UK over aggressive government intervention.

A separation of retail and investment activity is required to prevent a future crisis. Reducing proprietary activities that present particularly high risks has become a key regulatory issue for the retail banking industry.

The key challenges facing the banking industry over 2009-2010 will be shortages of capital liquidity/lack of funding, high credit costs, and global price volatility. A process of de-leveraging in most major banks will also result in increased pressure on balance sheets.

Smaller banks and new entrants may have a strategic advantage in the current financial climate. Recent data in the US suggests continued lending from smaller banks, as larger rivals retrench.

Use this report to
  • Assess the condition of the retail banking market in 2009, understand the factors that led to the current financial situation and determine the retail banking outlook in Europe and the US over 2009/10.
  • Identify how the competitive dynamics of the global retail banking market have changed by comparing and ranking leading banks across a number of variables including market share, total revenue, net income, retail revenue, safety and brand value.
  • Evaluate the future prospects of leading retail banks by using this report’s matrix analysis to compare performance and risk exposure for HSBC, Bank of America, JP Morgan Chase, Citigroup and Banco Santander.
  • Understand the impact of current and future regulation on the retail banking market by examining the impact of government intervention and exploring the effects of new legislation upon operational performance and future risk.
Key issues...

Government intervention to support weaker banks.

Identify:
  • which banks have used government aid,
  • how recipient banks have deployed government aid,
  • which banks will require further assistance,
  • the social and political issues surrounding the government aid supplied by the US, UK, and Europe.
The potential impact of new regulation.

Understand:
  • the implications of recently introduced regulation,
  • future EU and US legislation scenarios,
  • the concerns over the impact aggressive regulation may have in restricting the recovery of the industry.
The debate surrounding the banking business model.

Understand:
  • the flaws/benefits of balance sheet versus securitization intermediation,
  • the call to separate future retail and investment activities.
Public confidence in the retail banking industry.

Analyse:
  • the impact of lost consumer confidence
  • the strain this is placing on the recovery of the financial sector
  • the strategies that can restore public faith.


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