Europe’s banks missing out on global recovery

Tom Beck
BANKS are recovering across the world and their profits are surging – except in Europe, according to a report out today from Boston Cons ulting Group (BCG).

Lenders across the Middle East, Africa and the US are all growing, with income rising relative to costs of refinancing, operating and risk (economic return, or EP).

For the banks in North America, it was the first time EP levels have been positive since the beginning of the financial crisis in 2007. This success was largely attributed to reduced refinancing costs in the US, thanks to quantitative easing.

Banks in the Asia-Pacific region plateaued, yet still outpaced those in every other region. South American banks lost ground, posting a shrinking yet still positive EP, leaving Europe as the only region to post negative results.

Europe’s lack of success is attributed to a decreased level of gross income parallel with total assets, which fell amid a step-by-step deleveraging in Europe in 2013, while operating costs rose.

With refinancing costs expected to rise in Europe, European banks should focus on either the top line or the operating-cost base, BCG said.