Weathering the Storm in UK Retail Banking: Industry Research Report

Weathering the Storm in UK Retail Banking

Published Date: June 2009

Published By: Datamonitor

Page Count: 13

Order Code: R313-52353

Questions About This Report

E-mail a Colleague

Printable Page

Fax Your Order

Description

Table of Contents

Search Inside
this Report

Similar
Products

Overview: Catalyst; Summary; Executive Summary; There has been a marked change in consumers' financial attitudes and behavior; A tougher regulatory regime will constrain the future activity of UK banks; UK banks will need to focus on cost reduction to help improve their margins; Opportunities do exist for banks to increase their revenues; Table of Contents; Table of tables; Table of figures; The Impact of Regulatory Measures; Datamonitor predicts the UK banking environment will remain risk-averse and conservative over the next five to 10 years; Lessons can be learned from past mistakes in retail banking; The current crisis is likely to result in a significant increase in the amount of regulatory intervention; Regulators are set to impose strong and potentially cumbersome regulation on financial institutions; Each proposed regulatory reform has been scored on its likelihood of implementation; The regulatory authorities are set to bring in a raft of macro-prudential measures; Macro-prudential policy will be pushed to the forefront of new regulatory principles; Counter-cyclical capital buffers would put a constraint on lending during an economic boom; Micro-prudential measures for individual institutions are high on the agenda for regulatory reforms; An overhaul of mandatory capital and liquidity ratios will restrict lending; The current regulatory reform will lead to more international co-operation on regulation; Increased regulation of cross-border activity will limit the number of foreign-based competitors in the UK; The collapse of Landsbanki and the Icelandic banking system has led to calls for reform of the system; Overzealous regulation could have a damaging impact on London as a major financial center; Banks must prepare to deal with regulation that will limit their power and may see talent moving abroad; Adjustments to the tax regime could lead to an exodus of top talent; Individual product regulation is generally seen as too distortive to be beneficial; Individual product regulation is too distortive for it to be introduced effectively; Regulators look set to come down hard on hedge funds and short sellers in an attempt to curb risk taking; The current crisis has been blamed on excessively risky activities and hedge funds look set to bear the brunt of regulation; More intrusive regulation and increased communication with consumers are other measures that regulators are keen to enforce; Intrusive, direct regulation is an important change that will have a significant impact on banks; Consumer attitudes show a fundamental change in their views towards financial services providers; Consumers are reducing the amount of credit they use; Consumers are looking to save more and cut down on their credit card spending; Consumers are aware of what they should be doing during the recession although it remains to be seen how many will reach their goals; Consumers trust online price comparison sites more than banks and building societies; The future banking environment could vary significantly depending on the extent of the new regulation that is introduced; Under a conservative scenario tight regulation makes life difficult for banks and consumers; Economic growth will be tempered by a more restrictive regulatory regime; Tougher regulation is not an unconditionally positive step regarding the level of competition in retail banking; Consumers would find more restrictions in place on their banking activities; More direct regulation will play a part in encouraging banks to improve their service and raise consumer welfare; Under a liberal scenario banks will enjoy slightly more regulatory freedom, which should be beneficial for the economy; The economy will rebound more quickly but regulators will need to be careful not to let it overheat; The level of competition may suffer if measures are not taken to curb dominance; Consumer welfare can be augmented through a subtle yet more hands-on approach than before; A liberal regulatory model could lead to a return to excessive credit if it is not managed effectively; Achieving Sustainable Cost-Savings in a Low-Margin Environment; The past actions of many retail banks have come back to haunt them; Banks' behavior has drawn a huge amount of criticism; Changing the minds of a cynical public will require prudency and a significant campaign of goodwill; Banks need to revisit their business models to improve cost efficiency; The cost efficiency of all the major UK banks, except Abbey, deteriorated between 2007 and 2008; Crisis brings the opportunity for clear strategic gains; A cost-saving strategy needs to be board-driven and all encompassing; Cost management should be targeted to where it will really make a difference; Cost-savings efforts should be channeled appropriately so that they prove to be sustainable; Costs which are usually targeted initially are precisely the ones that creep back up once the pressure is off; Reducing cost of goods sold is a more strategic approach to cost management; Sustainable cost-savings must be the goal of a retail bank cost management program; Staff should be involved in cost-cutting measures; Innovative example: KPMG offers staff choices to help reduce the firm's costs; Significant cost-savings from process re-engineering are diminishing; Combine green initiatives with cost-savings to improve company profile and raise staff awareness; Innovative example: Lloyds TSB Group is tackling climate change initiatives at a central level and involving employees in its day to day business decisions; Green cost-saving initiatives should come from employees; Sustainable cost-savings: the little things add up to make a significant difference; Outsourcing can be an important way to save on operational costs but it can be a sensitive issue; Emphasizing outsourcing can detract from the need for better customer focus; There are opportunities for banks to bring the customer closer and achieve cost-savings; Banks should utilize available technology to achieve cost-savings and stay in regular contact with their customers; Banks should target their customer campaigns in order to maximize efficiency; Innovative example: Citi uses texts to achieve cost-savings and stay connected with customers; Banks can utilize technology to 'go green', save on costs and build a credible corporate image; Innovative example: HSBC goes green, saving costs and eliminating paper wastage, while promoting corporate credibility; Banks can reduce costs by rationalizing the portfolio of products and services offered; Innovative example: BNZ offers tailored packages to its customers from a limited range of products; A new model of retail banking has less branch staff but greater diversity in the range of work they are able to do; Banks need to optimize their utilization of staff and refine service levels; Opportunities for Growth in a Low-Margin EnvIronment; Many banks have struggled during the credit crunch, but the more successful ones have found strategies to adapt; The large UK banks have seen declining revenues whereas their Spanish counterparts have performed well; Most of the largest European banks have seen significant drops in profit levels; A coherent strategic plan can lead to strong revenue growth for financial institutions; Growth Strategy 1: international acquisitions in emerging markets; Problems in Eastern Europe mean that the region no longer presents an opportunity for further growth; Growth Strategy 2: develop a stronger offering in more marginal products; The hardening of key general insurance markets also presents revenue-generating opportunities; Growth Strategy 3: focus on the core fundamentals of the retail banking model; Advertising expenditure on savings accounts doubled in 2008 compared to 2007; Innovative tactics are a good shorter term method to target everyday consumers; Growth Tactic 1: mirror the large high street retailers by offering discounts and 'sales'; HSBC has captured the zeitgeist with its sale and special offers promotion; BNP Paribas is offering a variety of discounts through its website; Growth Tactic 2: promote a return to 'careful' and 'sensible' banking; NatWest is targeting new current account holders through its website; NatWest's MoneySense initiative can help consumers to better manage their finances; The Discover Motiva card provides consumers with a bonus for regular repayments; BNP Paribas is helping young people to rent an apartment; Growth Tactic 3: target profitable customers; Lloyds TSB's value-added account options allow for greater differentiation among its customer base; Growth Tactic 4: Invest in more face-to-face contact; Flexible opening times can raise revenue; Investment in their branch network coupled with longer opening hours can further entice more customers
APPENDIX: Supplementary data for The Future of UK Retail Banking; Supplementary data for Achieving Sustainable Cost-Savings in a Low-Margin Environment; Supplementary data for Opportunities for Growth in a Low-Margin Environment; Definitions; Credit default swap (CDS); Glass-Steagall Act; Macro-prudential regulation; Micro-prudential regulation; Methodology; Bibliography; Further reading; Ask the analyst; Datamonitor consulting; Disclaimer
List of Tables: Table 1: Impact of potential macro-prudential regulatory measures; Table 2: Impact of potential micro-prudential regulatory measures; Table 3: The impact of cross-border regulatory measures; Table 4: GFCI index of top financial centers, 2007-09; Table 5: The impact of individual product regulation; Table 6: The impact of measures to curb excessive risk-taking activities; Table 7: The impact of other regulatory measures; Table 8: Lloyds TSB greenhouse gas emissions; Table 9: Lending to individuals, Q1 1988-Q4 1996; Table 10: Lending to individuals, Q1 1997-Q4 2005; Table 11: Lending to individuals, Q1 2006-Q3 2008; Table 12: Household debt as a proportion of income, 1987-2007; Table 13: GFCI index of top financial centers, 2007-09; Table 14: Cost/income ratios of major UK banks, 2007-08; Table 15: Total advertising expenditure by UK banks, 2008; Table 16: Number of customers per retail branch, 2008; Table 17: The number of retail branches and customers by bank; Table 18: Revenue data for top 10 banks by market capitalization in April 2008; Table 19: Profit data for top 10 banks by market capitalization in April 2008; Table 20: Advertising expenditure, 2007 and 2008
List of Figures: Figure 1: The majority of respondents said that they plan to save more in the future; Figure 2: Most UK banks witnessed rising cost/income ratios between 2007 and 2008; Figure 3: With the exception of the Spanish banks, most banks saw profits decline or stagnate; Figure 4: Total lending experienced strong growth between 1992 and 2004; Figure 5: Household debt as a proportion of income fell away after the recession of the early 90s; Figure 6: The majority of consumers do not intend to use credit to fund their lifestyle; Figure 7: The majority of respondents said that they plan to save more in the future; Figure 8: The majority of respondents had saved more over the last six months; Figure 9: Banks and building societies rank among the most trusted financial institutions; Figure 10: Most UK banks witnessed rising cost/income ratios between 2007 and 2008; Figure 11: Total advertising expenditure by banks and advertising expenditure per customer, 2008; Figure 12: Citi uses texts to connect with customers based on their individually-defined criteria; Figure 13: HSBC's virtual forest saves the bank money and appeals to green customer sensibilities; Figure 14: BNZ offers tailored packages to its customers from a limited range of products; Figure 15: There is a wide range of customers per retail branch in UK banks, 2008; Figure 16: Most banks experienced a drop in revenue in the six months to June 2008 compared to June 2007; Figure 17: With the exception of the Spanish banks, most banks saw profits decline or stagnate; Figure 18: Advertising expenditure on savings products increased sharply in 2008; Figure 19: The style of HSBC's website is reflective of the overall economic situation in the UK; Figure 20: BNP Paribas has a variety of offers available to its customers; Figure 21: A large amount of the page is taken up advertising the current account; Figure 22: The Discover Motiva card has a number of special offers; Figure 23: BNP Paribas's section for young people could drive future revenue; Figure 24: Lloyds lists the extra features available with each value-added account type

	Research Index \| Publishers \| My Account \| Contact Us \| About MindBranch
	Welcome Guest (Login/Register) \| 0 items