Plummeting returns and fading investor confidence are forcing transformation to the top of the agenda for European banks. Return on equity (ROE) stood at 4% in 2013 and with half of European banks trading below book value, the Financial Services sector still faces very challenging times ahead.
With narrowing regulatory uncertainty, much is now known about the new conditions under which European banks must attempt to survive, compete and thrive. A new shape of the industry is emerging, which we outline in chapter two of this report.
The programme of change required to close the gap between the status quo and the future industry is daunting and we have found that after six years of crisis and remediation, banks are struggling across the board to deliver transformation. Despite the enormous effort and progress on balance sheet remediation, overall many banks are in a cycle of missed targets on large-scale change initiatives.
Our research this year has focused on understanding why this is and what can be done about it. We have interviewed and surveyed those responsible for change delivery within the major banks throughout Europe, across different seniority levels. We have heard about a series of issues, common to most European banks irrespective of size, business model or region. We explore these in some depth in chapter three of the report.
New innovative techniques for overcoming these challenges are beginning to emerge, some borrowed from other industries, some being invented within banking to fit the purpose needed. In chapter four we highlight some of the most exciting practices that banks struggling with transformation can use to improve.
Much has been written already about the causes of the financial crisis. However, in time, the process of reform and sector reshaping in banking will form one of the most fascinating case studies on change management anywhere in business history. We hope our research contributes to the understanding of the challenges and indeed some of the innovative change management solutions that are emerging.