Tuesday, 3 December 2019

European CIBs - !!!

Yeah, yeah. CIBs today. That's all right, ain't it?

European corporate and investment banks (CIBs) are in great difficulties.

Oh dear. I wonder what the problem is. Or ... what the problems are. 'Don't wonder, boss. Read the bloody email!' Well, I'll quote from it, Voice.

How they can address the fundamental constraints the industry is facing: cost inelasticity, revenue decline and talent evasion, and find profitability and performance again, CIB Outlook 2019 reveals.

Eh?! Talent evasion? Why are they evading talent? It doesn't make any sense, man. Everyone loves talent. This is crazy! I think - 'Boss.' What? 'Obviously, talent is evading the CIBs. That's the problem. Or one of the problems.' Oh, okay.

December 2, 2019. The European consulting firm EUROGROUP Consulting, in an exclusive annual study on corporate and investment banking (European CIB Outlook 2019), reveals the numerous challenges European CIBs urgently need to address, and outlines strategic and organizational solutions to help them reduce the performance gap with their US counterparts.

They've got solutions! Nice one! 'We'll see.' Well, they say they have, this Eurogroup Consulting. / Oh, a bit about them -

Eurogroup Consulting is a consultancy firm that specializes in strategy, management and organization. Created in 1982 as an independent and European resource, the firm has offices across 38 countries. With an international network of 3,200 consultants, including 400 in France, Eurogroup Consulting is known and recognized for its advisory in diverse business sectors, from private, public to social.

Fair enough. And, uh ... it seems that Matthieu Prieuret is available for interview. So ... 'What?! Who on earth is Matthieu Prieuret?!' Christ! He works at Eurogroup Consulting. 'Making the tea? Doing the dusting?' No. He's a partner, silly. 'Oh. Well, that's all right.' Of course it is! It's a good job, I should imagine. 'Are you going to interview him then?' Ha! No. But I'll let him speak in a minute. 'His voice will just come through, like.' Exactly.

There are numerous constraints on European banks: digital transformation, increased market volatility, historically low interest rates, a new wave of stringent regulation, massive investment in infrastructure, the introduction of pay caps for executives.

Dear oh dear. Listen! If I were them, dear reader(s), these banks, I would call it a day, man. I mean, find something better to do, you dig?

In fact, European banks are struggling and losing out to American banks, which have managed to strengthen their position in Europe, notably by relying on a large domestic market and a more favourable regulatory landscape.

Ah, those American banks! 'Nasty!' I don't mind them, Voice. Honestly.

A large majority of European CIBs experienced significant financial difficulties during the 2018 financial year. Despite an increase in overall CIB business revenue of 3.5% in 2018, mainly driven by Equity and Prime Services and a favourable exchange rate, Equity and Prime businesses fell by -21.6% causing in a -10% year-on-year fall in revenue in the first quarter of 2019.

Shit! But, but, BUT(!) ... what about the cost reduction programmes? 'I was just about to mention those, boss.' Yeah. Sure you were.

Even the cost reduction programmes put in place do not offset the decline in turnover.

Damn! Oh, I just don't know. I really don't know. 'Boss! A voice, incoming!'

According to Matthieu Prieuret, Partner of EUROGROUP Consulting in London, "The future prospects are bleak if European CIBs do not change their model. They must now consider drastic structural changes and address the fundamental constraints that the industry is currently facing by optimizing their cost base and revitalizing their talent to close the gap with US banks and protect their positions."

Thanks, Matthieu. But ... are you suggesting that these banks have been evading talent? It's not clear, son. 'You better interview him.' No, no. I don't want to talk to anyone.

Anyway ... three avenues to recovery. Look! -

The European CIB Outlook 2019 study identifies three avenues to recover profitability and competitiveness and capitalize on talent by focusing on:

- Assets industrialization (operations and technology) to pool together and reduce costs could increase profitability by around 2-4%.

- Structured finance opportunities and next generation financing model would generate revenue growth and improve profitability by 2-3%.

- Talent empowerment: Granting more autonomy to teams and revitalizing talent could lead to an increase in RoE of around 1-2%.

Okay, okay. The talent has got to be "revitalized" in some way. 'Boss. In the old days either you or Keith Busby would have gone into these banks to work on everyone's auras and chakras and that.' Ha, ha, ha! Those days are over, my little disembodied friend.

Okay, okay.



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