# Disruptive Strategies Required to Transform UK and European Banks’ Lacklustre Profitability, Warns New Study
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2018-01-05
Category: BANKING
Category URL: https://financedigest.com/category/banking
Meta Title: European Banking Study Warns of Industry's Falling
Meta Description: Discover why European banks are lagging behind competitors and the critical steps needed to prevent further decline in profitability and financial strength.
URL: https://financedigest.com/disruptive-strategies-required-to-transform-uk-and-european-banks-lacklustre-profitability-warns-new-studyhtml

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A new study of the 50 largest banking groups in the UK and Europe calls for disruptive management strategies to reverse lacklustre profitability across the industry, warning that Return on Equity (RoE) and Common Equity Tier 1 (CET1) ratios are in danger of falling below the average market and regulatory minimum over the next five years.

The European Banking Study (EBS), launched today by zeb, one of the leading global financial management consultancies, shows that European banks are lagging behind their international counterparts in profitability and operational efficiency. It goes on to predict four major trends that will dominate the European banking scene from now until 2021 in response to the current unhealthy state of the industry.

“Profitability has [become the critical concern for the European banking](https://www.financedigest.com/are-banks-destined-to-merely-become-infrastructure-providers-in-the-banking-industry-of-the-future.html "Are banks destined to merely become infrastructure providers in the banking industry of the future?") industry,” said Bertrand Lavayssière, Managing Director UK, zeb.  “Actual organic profitability of [Europe’s top](https://www.financedigest.com/telecom-italia-tops-europes-stoxx-600-amid-spiking-covid-19-cases.html "Telecom Italia tops Europe’s STOXX 600 amid spiking COVID-19 cases") 50 banks has declined significantly since 2012, and their average RoE has fallen to a level that is about half of what shareholders should expect based on a standard cost of equity calculation.

“And with Brexit looming ever-closer, it’s set to be an even bumpier road ahead. Although the top 50 European banks have strengthened their capital positions with a CET1 ratio of 13.5% in 2016, upcoming regulation and a continuation of the relatively low yield environment will increase the burden on these banks. If [banks do not employ disruptive strategies](https://www.financedigest.com/strategies-banks-use-to-manage-liquidity-risk.html "Strategies Banks Use to Manage Liquidity Risk") to reverse their own fortunes, they risk becoming targets for acquisition.  Without taking decisive action quickly, [banks’ profitability](https://www.financedigest.com/metro-bank-posts-second-quarter-of-profitability-on-mortgage-loans-demand.html "Metro Bank posts second quarter of profitability on mortgage loans demand") and financial strength could deteriorate further by the end of the decade – we could see, in a baseline scenario, RoE fall to 1.5% and CET1 ratios below the average market and regulatory minimum.”

**The** zeb **[European Banking](https://www.financedigest.com/u-s-european-banks-could-lose-over-5-billion-from-risky-buyout-loans.html "U.S., European banks could lose over  billion from risky buyout loans") Study includes:**

- A [detailed study](https://www.financedigest.com/fibrin-sealants-market-segmentation-detailed-study-with-forecast-to-2031.html "Fibrin Sealants Market Segmentation Detailed Study With Forecast to 2031") of Europe’s top 50 largest banking groups, with performance comparison to other global markets including US, Chinese and Australian banks
- Expert analysis of the factors affecting the [industry and dissection of the figures showing increased profitability of banks](https://www.financedigest.com/how-is-green-finance-reshaping-the-banking-industry.html "How is green finance reshaping the banking industry?") in 2016
- Projections by zeb on what the next five years hold for [global banks](https://www.financedigest.com/be-simple-in-bank-capital-bank-of-england-tells-global-regulators.html "Be simple in bank capital, Bank of England tells global regulators"), including identification of four major trends that will dominate the European banking scene from now until 2021 in response to the current unhealthy situation of the industry
- Recommendations for what is required from European banks if they are to prosper, including major changes needed, both in terms of more stringent re-evaluation of their business [models and the need for more innovative](https://www.financedigest.com/the-australia-new-zealand-surgical-respirator-masks-market-to-get-through-the-dynamic-model-of-innovation.html "The Australia New Zealand Surgical Respirator Masks Market To Get Through The Dynamic Model Of Innovation") approaches


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