How UK And European Investment Banks Are Catching The US

A new report from Oliver Wyman and Morgan Stanley supports the argument of a bright future for European wholesale banks for the first time in 15 years. It argues they are leaner, more focused, and higher returning than a decade ago. 

Ronan O’Kelly, head of corporate and institutional banking for Europe, comments the findings of the report for The Banker: “Our thesis here is that the industry has actually been through a continuous amount of cost cutting for many years. But that’s been a relatively cyclical play. And there is a case here for structural cost action to deliver a more efficient platform. And that’s ultimately about taking larger blocks of cost out in workforce infrastructure and processes. So apply automation, technology standardisation and start to experiment with generative AI.”

Banking revenue pools have grown by 20 per cent since 2019, reaching $195bn in 2023. The authors of the report add they expect these gains, with a structurally larger and more profitable pool, to be sustained.

The study also flags four actions that European banks can take to bolster returns in the future. First, focus on areas of comparative advantage, especially fixed income. Second, banks should look at making strategic alliances with non-banks to expand in sectors such as private credit. Third, links should be deepened between wholesale banking and private banking. And, finally, banks should look at controlling costs.

Read the full article in here (paywall).