Investment Analysis of the European Banking Industry
As the global banking industry moves towards a digital era and grapples with the nuances of changing business models, the European banking industry is still struggling to find its foothold after the 2008 financial crisis.
The industry is highly concentrated, with the top banks holding nearly % assets and revenue market share in the region. Market revenue is expected to stagnate due to economic, geopolitical, and regulatory concerns limiting industry growth. Customer focus, digital convergence, increasing competition, stagnant revenue growth, process integration, product innovation, defining new target segments, and changing business models are the main challenges for the industry. The European banking industry must strike a balance between risk and profitability and become more stable and sustainable.
The industry is coping with financial issues such as stagnant top and bottom lines, declining return on equity (ROE), increasing non-performing ratios, low capital ratios, and high leverage. There is a shortage of funds to raise capital and strengthen the industry balance sheet, but the super-complex operating models of large banks, IT infrastructure, and adapting to new techniques such as Big Data management all require huge investments. Rising regulatory compliance costs pose another strong challenge. For instance, the Basel III, Dodd Frank Act, and other regulations have affected the capital base, ROE, and other operating metrics of the banking industry, as companies incur additional costs to comply with these regulations. Cost-cutting measures such as downsizing human resources and capping salaries are being negated by increasing costs in other areas.
Mergers, acquisitions, and spin-off transactions may occur during 2015–2020 due to the strategic initiatives taken by banks to discard their non-core businesses while focusing and developing their core strengths. Follow-on public offerings (FPOs) may be a preferred way for diversified banks to raise capital, while others may try to source funds from private equity (PE and PIPE) firms.
About this report
This research service aims to provide a holistic picture of the European banking industry. It analyses financial data, identifies top performers, and discusses the relevant mega trends. It offers an overview of the financial state of the industry. It also includes a transaction analysis, which includes mergers, private placements, and public offerings. The revenue forecast period is from FY2015 to FY2020. Industry outlook is provided for the next 18 months ending December 2016.
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