Restructuring Europe’s banks: Still plenty to do

Blog snapshot:

In March 2017 we hosted our eighth European Bank Restructuring Conference. Our annual conference explores the opportunities opened up by restructuring in the European banking industry and how sellers, investors and other market participants can respond to them.

European banks are under mounting pressure to boost returns and lay the longer term foundations for competing in a market facing continuing technological, regulatory and political upheaval.

During the conference several themes emerged which are currently affecting European banks. These themes included:

Cause and effect: The underperformance of European banks

Almost a decade after the onset of the crisis barely a handful of European banks are covering the cost of equity and delivering an economic profit. Some of the causes of this underperformance are largely out of banks’ hands. Yet some are also inherent weaknesses within the banking industry itself.

Potential remedies for these weaknesses include both operational and structural changes, but there was a strong sense from the conference that the conditions for executing some of these changes remain very challenging, particularly when so much change capacity continues to be tied up with regulation.

Innovative approaches to the restructuring agenda

Conference participants felt there were indications of growing momentum with the restructuring agenda and a sense that, by breaking the problem down and taking an innovative approach, it can be made more manageable. For example, while there is widespread recognition that Europe is over-banked, there is also an acceptance that traditional consolidation – joining banks together – may not be the answer. Conference participants also noted that consolidation goes against the policy direction of wanting banks to be smaller, not bigger. There is little point in joining two small weak banks together to make one big weak bank unless it can then execute the structural and operational changes to make itself stronger.

Operational consolidation

Across the board, participants felt that there is still a lot of mileage in operational consolidation through things like platform sharing, outsourcing etc.; and balance sheet consolidation through asset pooling, securitisation and the outright sale of non-core loans. On the income side participants felt there must be scope for banks to consolidate their front-ends through joint ventures, white labelling etc., thereby giving customers the benefits of universal banking without the need for (and costs and risks associated with) universal banks as such.

Finally, it was felt that there must be a lot more scope for banks to become more cost efficient, and to grow revenue, by further embracing technology (and/or technology partners). Participants commented that one of the main reasons that US banks tend now to be on a stronger competitive footing is that they’ve already carried out much of the heavy lifting needed to deal with the new market realities.


Challenging as it will be for the European banking industry (including in the UK) to adjust to the requirements of the new trading relationship between the UK and EU27, and to manage through all the uncertainty in the meantime, participants felt that the disruption will also be an opportunity for renewal, hopefully encapsulating some of the aforementioned restructuring moves. Doubtless, the structure of the European banking market will be very different in ten years.

Deal momentum

Participants felt that deal momentum was strengthening and activity is broad; from non-performing and non-core asset sales; to strategic business portfolio adjustments (finding ‘better owners’ of assets and businesses); to collaborations and alliances on infrastructure, products, customers and technology innovation; to opportunistic M&A.

While the frictions and challenges are daunting, many participants felt the imperative to be overwhelming.

Find out more about our 2017 conference and download the full conference report.


Richard Thompson

Richard Thompson | Global Leader, Portfolio Advisory Group
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