Transcript Slide 1

Growth Opportunities in European Banking
Despite the dismal macroeconomic outlook, there is
still banking growth expected in Europe
Europe, EUR billion
2011 fixed FX terms
2012-20 CAGR
CONSENSUS SCENARIO
Volumes (average) 1
EUR billion
Revenue before risk cost
EUR billion
4.3%
86,255
61,591
4.3%
1,129
809
2012
2020
Revenue after risk cost
EUR billion
2012
2020
7.6%
Margin
Percent
-0.5
1%
bps
986
Risk cost margin
Percent
550
2012
2020
0.42%
Despite healthy pattern, share of
Europe in global growth decreases
from 20% between 2000-07 to 10%
between 2012-20
SOURCE: McKinsey Global Banking Pools
-26
bps
1.31%
1.31%
2012
2020
0.17%
2012
2020
2
Global trends are expected to balance each other out resulting
in ~4% European banking growth similar to GDP growth
CONSENSUS SCENARIO
Global trends
Deleveraging
• WE private sector debt down by 2015
(especially in South East Europe) but then
recovers by 2020
• Eastern Europe penetration increases
from 59% to 67% by 2020
Interest rate cycle
• Slow increase of Eurozone base rate is
expected by 2015
• Yield recovery and EE savings catch up
• Higher deposit margins
Regulation and technology
• Price caps and increasing base rates
reduce lending margins
• Online channels and digital technologies
increase competition, reduce margins
Main drivers
of change
Drivers of revenue after risk cost, CAGR
2012-20, percent
Nominal GDP impact
3.4%
Δ Lending to GDP
-0.2%
Δ Wealth to GDP
0.2%
Volume impact
3.4%
Δ Deposit margins
1.9%
Δ Lending margins
-1.8%
Change in capital markets
revenues
0.8%
Revenue before risk cost CAGR
4.3%
Risk cycles
• Decreasing risk costs enable lower
lending margins
SOURCE: McKinsey Global Banking Pools
3
The visible develeraging of Western European countries is
offset by Eastern Europe and long term trend reversal
CONSENSUS SCENARIO
Private sector debt (corporate loans + corporate bonds + household loans) to GDP
percent
Private sector deleveraging
• 16% in PIIGS
• 13% in other WE
180
180
160
150
120
157
160
139 134
140
167
137
140
164
154
136
154
159
WE exc.
PIIGS
PIIGS
148
118
120
100
100
95
80
60
60
40
40
20
20
0
2000
09
12
15
20
59
59
62
67
09
12
15
20
Eastern
Europe
32
0
2000
Low banking penetration - in addition to deleveraging, European banking revenue before risk cost
penetration will stay low at 5.3% vs. the global average of 6.2% in 2020
SOURCE: MGI; McKinsey Global Banking Pools
4
Eastern Europe will become significant not only in relative
but also in absolute growth terms
CONSENSUS SCENARIO
Absolute growth in revenue before risk cost 2012 – 2020, EUR terms
2012–20 CAGR
Calculated with
fixed FX rates
+3
+5
+7
+33
+77
+1
+5
+4
+10
+1
+8
+9
+34
+4
+31
+12
+3
+1
+4
+13
Size of absolute
growth of revenue
after risk cost
2012-20
+2
+3
+4
+2
+1
+5
+23
SOURCE: McKinsey Global Banking Pools
> 8%
5-8%
4-5%
3-4%
2-3%
0-2%
< 0%
+6
5
Plenty of hot-spots in a more granular view
due to regulation, rebound and other factors
Revenue before risk cost CAGR 2012–2020
Percent
Total
UK
GER
ESTIMATES
FRA
ITA
ESP
POR
NED
SWE
SUI
RUS
POL
N/A3
< 0%
0-2%
2-3%
3-4%
4-5%
5-8%
8-10%
10% <
HUN
ROM
Total
Retail banking
Consumer finance
Mortgages
Deposits and Payments
Investments and
Insurance
Capital markets1
Corporate banking2
Cash management
Financing and loans
Asset management
1 Includes Investment Banking, Sales & Trading and Securities services
2 Includes Non-bank Financial Institutions and Public sector
3 Not applicable, as base is negative
SOURCE: McKinsey Global Banking Pools
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