Global financial markets have suffered a serious impact from the financial crisis and economic recession. Only a few banks have escaped unscathed as the retail banking industry continues to adjust to shifts in the global financial and economic environment. The impact of these changes will drastically alter the retail banking landscape, with updated and coordinated international regulation, higher risk, capital shortages and a potential legislative separation of the retail and investment banking sectors.

‘The Outlook for Retail Banking in Europe and the US’ is a new report that examines the impact of the financial crisis on the retail banking market in Europe and the US. It analyzes the current state of the sector, with an in-depth evaluation of the retail banking industry. Leading retail banks are assessed and ranked based on a variety of factors to compare performance, with key factors contributing to risk profiles and performance potential also provided. The report examines the influence of government intervention and explores the potential impact of future legislation upon the industry. It identifies the future implications for the retail banking market in Europe and the US in the next year and assesses emerging business models and corporate strategies for the future.

Key Findings

HSBC dominates the retail banking market in 2009, when assessed by total revenue. Citigroup’s total revenues have fallen by almost 40%, while Bank of America experienced a year-on-year increase of 10.8%.

The US is likely to lose its dominance of the retail banking market, while European banks are growing in stature and are better placed to take advantage of opportunities in 2009. However, concerns are rising in the UK over aggressive government intervention.

A separation of retail and investment activity is required to prevent a future crisis. Reducing proprietary activities that present particularly high risks has become a key regulatory issue for the retail banking industry.

The key challenges facing the banking industry over 2009-2010 will be shortages of capital liquidity/lack of funding, high credit costs, and global price volatility. A process of de-leveraging in most major banks will also result in increased pressure on balance sheets.

Smaller banks and new entrants may have a strategic advantage in the current financial climate. Recent data in the US suggests continued lending from smaller banks, as larger rivals retrench.

Use this report to

• Assess the condition of the retail banking market in 2009, understand the factors that led to the current financial situation and determine the retail banking outlook in Europe and the US over 2009/10.

• Identify how the competitive dynamics of the global retail banking market have changed by comparing and ranking leading banks across a number of variables including market share, total revenue, net income, retail revenue, safety and brand value.

• Evaluate the future prospects of leading retail banks by using this report’s matrix analysis to compare performance and risk exposure for HSBC, Bank of America, JP Morgan Chase, Citigroup and Banco Santander.

• Understand the impact of current and future regulation on the retail banking market by examining the impact of government intervention and exploring the effects of new legislation upon operational performance and future risk.

Key issues...

Government intervention to support weaker banks.

Identify:
• which banks have used government aid,
• how recipient banks have deployed government aid,
• which banks will require further assistance,
• the social and political issues surrounding the government aid supplied by the US, UK, and Europe.

The potential impact of new regulation.

Understand:
• the implications of recently introduced regulation,
• future EU and US legislation scenarios,
• the concerns over the impact aggressive regulation may have in restricting the recovery of the industry.

The debate surrounding the banking business model.

Understand:
• the flaws/benefits of balance sheet versus securitization intermediation,
• the call to separate future retail and investment activities.

Public confidence in the retail banking industry.

Analyse:
• the impact of lost consumer confidence
• the strain this is placing on the recovery of the financial sector
• the strategies that can restore public faith.