Sfarsiturile de an sunt ocazii foarte bune pentru a discuta despre viitor. Incercarea de a prezice ce se va intampla in perioada urmatoare este cu atat mai legitima cu cat ultimii 5 ani au rasturnat din temelii multe principii de afaceri, afaceri in sine si comportamente de consum.
In ultima saptamana din noiembrie, in Bucuresti, Oliver Wyman, firma de consultanta selectata de European Central Bank sa ii asiste in proiectul lor de evaluare a calitatii bilanturilor bancilor a prezentat in cadrul unei conferinte organizate de Baker Tilly Klitou raportul “The shape of things to come – What recent history tells us about the future of european banking”.
Previziunile lor sunt urmatoarele:
1. New competitive structures slow to emerge but setting down long term roots and capital formation in danger of drifting out of the core banking sector
Unexpectedly, change to the competitive environment has been slow. The crisis and subsequent response have actually reinforced barriers to entry. However, new competitors, small today, are beginning to accumulate and incumbents would be wise not to discount the medium term threat. More dramatically, significant equity value is being created at the periphery of the industry by non-banks delivering infrastructure and information based services.
Banks need to wake up quickly to this trend to avoid significant transfer of value outside the traditional banking ambit.
2. Increasing role of non-banks in financing and opportunities for some banks in making it happen
The risk to banks of large scale disintermediation has been exaggerated. If anything, banks now need to push for more disintermediation to overcome their own balance sheet constraints, by accelerating the deepening of bond markets and bringing more investors into loan markets.
Banks that can learn to partner effectively with non-bank lenders will generate disproportionate value from the growth of the ‘direct’ credit markets.
3. Deleveraging likely to accelerate but remain more limited than many think
Asset disposals to date have been very low, principally due to public funding support, a bank-heavy credit intermediation market structure, the need for net interest margin to cover operating costs and a lack of appetite to take capital write-downs associated with asset sales.
We anticipate these factors will continue to drag on restructuring. Nevertheless, balance sheet restructuring will accelerate, driven by a potentially very significant inflection point created by the Asset Quality Review (AQR), the focus by regulators on Capital Requirements Directive (CRD) IV leverage ratios and by investors increasingly pricing leverage into valuations.
We also predict substantial technical optimisation of banks’ balance sheets to take place in the coming twelve months.
4. Smooth withdrawal of public capital and funding decoupling to gather pace
European Central Bank (ECB) funding has peaked and governments are beginning to plan for share sales. As banks’ solvency is improved by the introduction of capital buffers and leverage ratios, the decoupling of sovereign and bank risk should accelerate, somewhat offsetting the slow progress of a Europe-wide resolution authority and the lack of clarity around resolution and ‘ring-fencing’.
We do not underestimate the risk of discontinuities in funding markets, enhanced by recent loading of government debt on banks’ balance sheets. However, the balance of information points to a base case of orderly, if very gradual, decoupling. Banks will face strategic choices about how aggressively to use the decoupling levers at their disposal.
5. Improving returns and valuation but only for some
Returns are at historic lows, with further downward pressure from regulatory change to come. These returns are highly correlated with country, driven by factors such as funding costs, GDP growth and non-performing loan (NPL) ratios. Valuation has taken a similar path, overwhelmingly driven by country and sovereign. However, as NPLs begin to normalise and the decoupling of sovereign and bank risk progresses, there will be more opportunity for idiosyncratic bank strategies to affect returns and valuations. Capitalisation and cost management will be key. Well-capitalised banks will be able to make targeted strategic choices to optimise their portfolios, while effective cost reduction will deliver higher returns in the low-growth environment.
As a result we expect to see greater divergence of performance and reward as bank strategies reassert their significance. The logic of technology-led consolidation will become powerful, but concerns over creating larger banks will deter M&A. A European stability mechanism and single supervisor may change this and put medium-sized deals in developed Europe back on the agenda further down the line.
6. Utility’ banking increasingly attractive though there will be rewards for the few who can grow earnings power
We take a different view to much of the negative commentary about regulators forcing banks to become utilities. If delivering stable earnings with a predictable risk profile, drawing out core market operating profits and returning excess capital through a high dividend policy is a utility, then for many banks this will become an attractive vision to embrace, and will be rewarded by investors looking for bond-like returns.
That said, we anticipate a handful of banks will push for more equity-like earnings growth and, if successful, will be rewarded with higher valuations. We see grounds for caution for the many banks implicitly following a hybrid strategy, such as a convertible bond strategy or a bond strategy juiced with some yield enhancement.
7. Sharper operating models will emerge partnerships and outsourcing key
The battleground for much of the industry will be cost effectiveness. Costs have risen across the big incumbents by an average of €3.5BN each since 2006, despite waves of attempted cost reduction. More radical thinking has to take root, built on bigger spend, channelling more technology-focused capex and accelerating branch consolidation to generate substantial and sustainable returns.
In particular, we expect supply chains to emerge where much more of the cost base of the industry is sourced from utilities or third party specialists. New entrants and emerging markets players could appear as the early winners here.
8. Better customer service at least for those willing to pay
Most European banks have been forced to concentrate on their home markets. As the need to squeeze out gains from market share increases and conduct regulation stamps out the scope to exploit price elasticity, the focus on the customer experience has become paramount.
We see senior banking executives obsessing, as never before, about how to make the customer experience more satisfying and hassle-free. The flipside is in more sophisticated use of segmentation, giving higher levels of service only to those able and willing to pay for it.