Financial Consultants Mercer Oliver Wyman Estimate European Banking Revenues Will Reach EURO170 Billion By 2015

Europe has become one of the most buoyant markets in international banking and banking revenues in the region are set to increase by around 13 percent per annum from €55 billion today to €170 billion in 2015, according to Mercer

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Europe has become one of the most buoyant markets in international banking and banking revenues in the region are set to increase by around 13 percent per annum from €55 billion today to €170 billion in 2015, according to Mercer Oliver Wyman, the financial services consulting firm.

According to Mercer Oliver Wyman’s report, “Seizing the €170 billion opportunity in Emerging Europe: New strategies for success”, highest future growth from a product perspective will occur in corporate and investment banking with an estimated revenue growth of 14 percent per annum until 2015 through strong demand for corporate finance, transaction services and asset finance products. Retail banking will also see double digit growth levels with strong demand for private lending products reflecting expanded household consumption and increasingly “Westernised” lifestyles.

At a country level, the non-EU countries of Ukraine, Russia and Turkey offer the highest growth rates by some margin. Russia in particular will account for approximately 40 percent of Emerging Europe’s revenue potential.

Mercer Oliver Wyman argues that appetite for further investment in the region continues to be driven by a number of factors:

1. Relatively mature Western European markets which offer limited growth potential;

2. Western European banks currently hold more than €80 billion of excess capital, giving means and motivation to invest in growth markets;

3. Acquiring in Emerging Europe offers diversification benefits that can amount to between 10 percent and 20 percent of economic capital.

4. Successful track record of banks such as KBC and Erste in boosting their performance through building Emerging Europe portfolios.

“Despite the expected strong growth ratio, market share and presence is no longer enough for banks to succeed in Emerging Europe,” says Thomas Raab, a director at Mercer Oliver Wyman. “Heavy competition and fewer acquisition targets should prompt a major strategic rethink for incumbents and new entrants alike. The region still offers many rewards for those prepared to take a more regional approach, creating portfolios of businesses which are scalable across disparate countries.”

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