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How Pricing Can Solve European Banking’s Earnings Crisis
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How Pricing Can Solve European Banking’s Earnings Crisis

Carsten Baumgärtner, Stefan Bochtler, Amadeus Petzke and Ian Wachters
Boston Consulting Group, 2018
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Editorial Rating

8

Qualities

  • Analytical
  • Applicable
  • For Experts

Recommendation

Because their costs exceed their revenues, European banks have seen negative returns since 2012. While they focus on restructuring to meet increasingly stringent regulatory requirements, these institutions have not revised their pricing to sustain profitability. According to professionals at the Boston Consulting Group, dynamic and data-driven pricing models present an opportunity to bolster the bottom line and mitigate the adverse effects of regulation. getAbstract suggests this astute technical analysis to financial executives for its diagnostic insights.

Take-Aways

  • Persistently high expenses and weak revenue, along with growing regulatory compliance costs, have compressed European banks’ margins. 
  • For European banks to regain profitability and cover regulatory outlays, their prices should rise by 130–220 basis points from 2018 through 2021. 
  • But in a low-interest rate environment and with nonbank fintechs ratcheting up the competition, senior executives have been reluctant to pass cost increases on to clients. 

About the Authors

Carsten Baumgärtner et al. are professionals with the Boston Consulting Group.

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