In September 2024, PwC Strategy& published its annual Retail Banking Monitor, outlining a comprehensive performance analysis of the recent trends of European retail banking. The analysis covers ~50 retail banks or banking groups across 15 countries, with a market share coverage per country ranging from 50% to above 90%.
The analysis highlighted that after a growth-inducing year in 2022, 2023 has solidified such growth and allowed market participants to further increase their revenue margins. Banks managed to contain operating cost growth in 2023 to a few percentage points – mainly driven by inflationary pressures. Ultimately, the positive gap between revenue and cost has increased considerably, as banks continued to reap the benefits of interest hikes and margin expansion.
The comprehensive analysis also examined the year-on-year growth of operating income per customer from 2022 to 2023 (based on constant FX rates). The analysis showed another positive year (2023) for topline development of European banks. However, country context matters show that:
- at the top end, Italian (+69% YoY), Austrian and Spanish banks (+44% YoY each) displayed a substantial boost in their net interest income;
- at the lower end, France experienced a decline in net interest income, due to structural reasons: a high share (~80-90%) of fixed-rate loans in combination with an increase in regulated deposit rates (e.g., “Livret A” rate at 3%).
Overall, fees and commission income have remained flat, with significant declines in certain markets such as the Nordics (-12% year-over-year) and Spain (-7% year-over-year). These decreases are partly attributed to a shift in the product mix towards fixed income and deposit products.
Where you are is how much you grow
YoY growth of operating income per customer
(2022 to 2023, based on constant 2023 FX rates)
Although 2023 showed positive results, various macroeconomic developments are leading to a less favourable outlook, with rising cost pressures on the financial services sector.
Consequently, financial market participants must rethink their strategies and focus on five main priorities.
These priorities, once implemented in a diligent manner, can give financial institutions the competitive edge they need to outperform their respective markets, seeking external guidance and support where necessary for the successful implementation of these guidelines.
For further insights and access to the full report, click here.
Contact us
