The Global Banking Outlook 2017

Transcription

1 s The Global Banking Outlook European survey results analysis Page 1

2 EY s first Global Banking Outlook Survey reveals the European banking sector is unlikely to see significant improvement in profitability in 55% of European bankers anticipate their bank s financial performance will improve over the next year, but the average ROE uplift is expect to be just 1.% The outlook is positive for most business lines, with twothirds of European bankers anticipating a good outlook for debt and equity issuance. Regulatory compliance and management of reputational risk are expected to dominate management attention in the next 12 months, with % of European bankers ranking these as very important agenda items. Page 2

3 Most bankers expect their financial performance to strengthen in the next year How do you expect your bank s financial performance to change over the next 12 months?* Weaken significantly Weaken slightly Stay the same Strengthen slightly Strengthen significantly Comments: European banking executives are slightly less optimistic about their financial performance than their global peers and significantly less optimistic than their North American peers. Faced with continued low interest rates and weak economic growth, as well as uncertainty surrounding the Brexit negotiations and upcoming elections in major European economies, on average European banks anticipate revenue growth of 1.9%, and for costs to fall by just.%. However, with these modest improvements, banks are unlikely to achieve the 1.% ROE uplift they anticipate without further capital optimization. Bankers expectations of financial performance vary across different markets. In Ireland, bankers expect ROE to increase by about 3.6%, supported by improving asset quality and an anticipated rise in domestic demand led by a gradual improvement in labor market. Bankers in the UK, Italy, Germany and Switzerland also expect their banks ROE to rise in excess of 1.5%. By contrast, banks in the herlands with high household indebtedness and Belgium where the economy and trade with Britain is expected to suffer in the wake of Brexit are more pessimistic, with bankers expecting ROEs to decline by over 1.5%. * Numbers reflect the percentage of respondents who answered. Base excludes respondents who answered Don t know. Page 3

4 supported by a positive outlook for all lines of business, especially debt and equity issuance and corporate banking How do you rate the outlook for your bank over the next 12 months in each of the following business lines?* Debt and equity issuance good 3 56 good 56 Corporate banking Asset management Retail banking Private banking and wealth management Transaction advisory (e.g., M&A) Securities services ** Deposit business Securities trading Very poor Fairly poor Fairly good Very good Comments: While most respondents see the outlook as good for all business lines, their has been a slight deterioration in expectations for many business lines. The outlook is most positive for debt and equity issuance business, as central bank policies (i.e., ECB policy regarding its QE program extended until Dec ) and regulatory measures such as total loss-absorbing capacity (TLAC) and minimum requirement for own funds and eligible liabilities (MREL) requirements, as well as in national insolvency laws, is likely to give a further push to new capital issuances or capital replacements. There is also an improvement in the outlook for retail banking. While in recent years bankers were hampered by a sluggish economy, historically low interest rates and a stiff regulatory environment, many banks are now investing in their technology to improve customer experiences, implement open APIs, build partnerships with FinTechs or expand digital payments, which may enhance growth in retail banking. Interestingly, while still positive, expectations for private banking are significantly weaker than in previous years. The prospective loss of passporting due to Brexit, means UK wealth managers may have to look for new ways to serve their European client base. Base excludes respondents answering Does not apply or who chose not to answer. * Numbers reflect the percentage of respondents who answered. Respondents answering Neither good nor poor are not displayed. ** E.g., custody, fund administration, collateral management, etc Page 4

5 even though banks expect lending policies for most sectors to tighten How do you expect the corporate and consumer lending policies of banks in your market to change in each of the following sectors over the next 12 months?* Corporate lending policies less restrictive Consumer lending policies less restrictive Information technology Manufacturing and industrials** Health care** SMEs (small-medium size enterprises) Media and telecommunications Commercial and professional services Financial services Retail and consumer products Construction Commercial real estate Energy, mining and minerals Transport** Personal loans Business loans Mortgage lending Credit cards Other forms of unsecured personal credit Peer-to-peer lending Less restrictive More restrictive Comments: With Europe facing significant political uncertainty in the near term, corporate lending policies are expected to become more restrictive across most of the sectors. The sector in which most bankers anticipate more restrictive lending is the transport sector, which is grappling with digital vulnerability, rapid technological advancement, and geopolitical instability. Bankers also expect lending to capital intensive sectors, such as commercial real estate, construction and the energy sector to be more restricted. On the other hand, respondents expect lending policies to be less restrictive for the information technology sector in all markets except France, Ireland, Poland and Switzerland. This will be critical to support the tech and start-up ecosystem in Europe, which is expanding steadily and gaining strength in areas like machine learning and artificial intelligence. Similarly, banks are expected to be less restrictive in lending to firms in the manufacturing and industrials sector, supported by growth in Europe s manufacturing purchasing managers index (PMI), which is at highest since the spring of. Bankers also expect consumer lending policies to remain less restrictive across all the sectors, except peer-to-peer lending, supported by an improvement in labor markets in a few countries and expectations that central bank rates will remain low. Base excludes respondents who answered Don t know. * Numbers reflect the percentage of respondents who answered. Respondents answering Remain unchanged are not displayed. ** Manufacturing and industrials includes chemicals, engineering, infrastructure and materials; Health care includes pharmaceuticals, biotechnology and life sciences; transport includes automotive and shipping. *** CIPD Labour Market Outlook, Source: Link Page 5

6 The strategies of European banks suggests they are focused on optimization and risk management over the medium term Analysis of the strategies of 3 major banks around the world reveals that: Grow With European banks continuing to struggle with legacy issues, cost management is at the top of their strategic agenda, particularly as they seek to improve profitability in the lowrevenue growth environment. Reshape Optimize Risk management is also a key priority for European banks, as they work to dispose of noncore assets and identify an appropriate business mix. In 16, regaining profitable customer growth emerged as a key strategy for most North American and Australian banks. Control Protect North American banks European banks APAC and Japanese banks North American banks have a greater focus on protect initiatives due in part to proactive regulatory intervention. Asia-Pacific and Japanese banks have a strong focus on growth and are also seeking to optimize capital and operations to drive profitability. Source: The Global Banking Outlook Page 6

7 as is borne out by their priorities for the next 12 months Meeting regulatory compliance and reporting standards (including IFRS reporting/harmonization, Basel III, MiFID II/EMIR, IFRS9, BCBS239, other country-specific regulations) Managing reputational risk, including conduct and culture risks (e.g., to avoid potential criminal sanctions or reputational damage) Rank order of importance Optimizing customer channels (e.g., digitization and focus on self-serve) Strategic efficiency and cost reduction (e.g., streamlining processes/further standardizing and resolving legacy IT issues) Recruiting and retaining key talent Investing in new customer-facing technology (e.g., mobile solutions, Internet of Things, robo-advisors, artificial intelligence) Complying with consumer regulation issues and/or dealing with remediation Leveraging new technologies for efficiency (e.g., robotic automation) 61 - Grow Optimize Protect Control Reshape Enhancing cybersecurity/data security Meeting tax compliance information reporting requirements (FATCA, CRS) Comments: In European banks among others will have to go through several thematic reviews with regard to business models, credit risk and risk management to comply with a tougher risk-based capital regime. They are also under scrutiny with regard to data aggregation and risk reporting. It is therefore unsurprising that meeting regulatory compliance and reporting standards is the top agenda for the bankers in. Similarly, in light of a series of conduct-related charges faced by the European banks last year, managing reputational risk has gained importance among European banks. While optimizing customer channels and strategic efficiency are ranked in the top five items in most of the markets in Europe, banks in some markets, such as Belgium and the Nordics, are more focused on growth initiatives, and see investing in customer technology as one of their top priorities. In Switzerland and Germany, recruiting and retaining key talent is seen as top focus area. Most surprising, perhaps, is the fall of cybersecurity to only the ninth-ranked agenda item for European banks. Base excludes respondents answering Does not apply. * Respondents were asked to rank the importance of activities on a scale of to 1, where denotes Not at all important and 1 denotes Very important. Numbers show the percentage of respondents selecting either, 9 or 1. Page ** The Digital Economy and Society Index by the European commission, Source: Link

8 With a strong focus on optimization, many European bankers anticipate further headcount reductions in the next year Over the next 12 months, how do you expect the headcount of your bank to change?* increase -3 Asset management Private banking and wealth management increase Compliance, risk and finance Other head office functions Corporate banking Investment banking Operations and IT Retail and business banking Administration Decrease significantly Increase slightly Decrease slightly Increase significantly Decrease Increase Comments: With strong focus on Optimization, 62% of European respondents predict their bank s headcount to fall in, which is highest since 12. A net percentage of respondents expect headcount to fall in almost all markets. Only in Austria and Ireland do more bankers foresee a rise in their workforce in. As last year, the greatest headcount reductions are anticipated in administration, operations and IT and other head-office functions. Headcount is also expected to reduce in retail banking even though bankers expect the business outlook to improve. This may reflect the focus of bankers on digitization in the retail operations, which may lead to redundancies. Unsurprisingly, recruitment will be focused on growth sectors such as asset management, with Belgium and the herlands the only countries expecting headcount reduction in this sector. Base excludes respondents answering Don t know/depends. * Numbers reflect the percentage of respondents who answered. Respondents answering Stay the same are not displayed. Page

9 Appendix - Outlook by Market Page 9

10 Outlook of bank s financial performance (1/2) How do you expect your bank s financial performance to change over the next 12 months?* Austria Belgium 44 France Germany 63 Ireland Italy 3 3 herlands Poland 1 Nordics Spain Switzerland UK Weaken significantly Weaken slightly Stay the same Strengthen slightly Strengthen significantly * Numbers reflect the percentage of respondents who answered. Base excludes respondents who answered Don t know. Page 1

11 Outlook of bank s financial performance (2/2) How do you expect your bank s performance measures to change over the next 12 months?* Average percentage change Revenue Cost base ROE Austria Belgium France Germany Ireland Italy herlands Nordics Poland Spain Switzerland UK , -4, -3, -2, -1, -,, 1, 2, 3, 4, 5, Decrease significantly Percentage increase Stay the same Increase significantly Increase * Numbers reflect the percentage of respondents who answered. Base excludes respondents who answered Don t know. Page

12 Outlook of business lines (1/3) How do you rate the outlook for your bank over the next 12 months in each of the following business lines?* Debt and equity issuance Corporate banking Asset management Austria Belgium 3 France 3 5 Germany 5 Ireland Italy herlands Nordics Poland 1 Spain Switzerland UK Very poor Fairly poor Fairly good Very good Base excludes respondents answering Does not apply or who chose not to answer. * Numbers reflect the percentage of respondents who answered. Respondents answering Neither good nor poor are not displayed. Page 12

13 Outlook of business lines (2/3) How do you rate the outlook for your bank over the next 12 months in each of the following business lines?* Retail banking Private banking and wealth management Transaction advisory (e.g., M&A) Austria 1 Belgium 1 France Germany 5 Ireland 5 Italy 69 herlands Nordics Poland 44 Spain Switzerland 1 UK Very poor Fairly poor Fairly good Very good Base excludes respondents answering Does not apply or who chose not to answer. * Numbers reflect the percentage of respondents who answered. Respondents answering Neither good nor poor are not displayed. Page

14 Outlook of business lines (3/3) How do you rate the outlook for your bank over the next 12 months in each of the following business lines?* Securities services (e.g., custody, fund administration, collateral management etc.) Deposit business Securities trading Austria Belgium France Germany 5 Ireland 1 Italy herlands Nordics 3 42 Poland 9 64 Spain Switzerland UK Very poor Fairly poor Fairly good Very good Base excludes respondents answering Does not apply or who chose not to answer. * Numbers reflect the percentage of respondents who answered. Respondents answering Neither good nor poor are not displayed. Page

15 Outlook of corporate lending policies (1/4) How do you expect the corporate lending policies of banks in your market to change in each of the following sectors over the next 12 months?* Information technology Manufacturing and industrials** Health care** Austria Belgium 5 3 France Germany Ireland Italy 9 3 herlands 3 3 Nordics Poland Spain Switzerland UK Less restrictive More restrictive Base excludes respondents who answered Don t know. * Numbers reflect the percentage of respondents who answered. Respondents answering Remain unchanged are not displayed. ** Manufacturing and industrials includes chemicals, engineering, infrastructure and materials; Health care includes pharmaceuticals, biotechnology and life sciences; transport includes automotive and shipping Page 15

16 Outlook of corporate lending policies (2/4) How do you expect the corporate lending policies of banks in your market to change in each of the following sectors over the next 12 months?* SMEs Media and Telecommunications Commercial & professional services Austria Belgium 3 3 France Germany Ireland Italy 21 herlands Nordics Poland Spain Switzerland UK Less restrictive More restrictive Base excludes respondents who answered Don t know. * Numbers reflect the percentage of respondents who answered. Respondents answering Remain unchanged are not displayed. ** Manufacturing and industrials includes chemicals, engineering, infrastructure and materials; Health care includes pharmaceuticals, biotechnology and life sciences; transport includes automotive and shipping Page 16

17 Outlook of corporate lending policies (3/4) How do you expect the corporate lending policies of banks in your market to change in each of the following sectors over the next 12 months?* Financial services Retail and consumer products Construction Austria Belgium 3 3 France Germany 5 Ireland 5 Italy herlands 5 Nordics Poland 64 9 Spain Switzerland UK Less restrictive More restrictive Base excludes respondents who answered Don t know. * Numbers reflect the percentage of respondents who answered. Respondents answering Remain unchanged are not displayed. ** Manufacturing and industrials includes chemicals, engineering, infrastructure and materials; Health care includes pharmaceuticals, biotechnology and life sciences; transport includes automotive and shipping Page

18 Outlook of corporate lending policies (4/4) How do you expect the corporate lending policies of banks in your market to change in each of the following sectors over the next 12 months?* Commercial real estate Energy, mining and minerals Transport Austria Belgium France Germany 5 1 Ireland Italy herlands 63 Nordics Poland Spain Switzerland UK Less restrictive More restrictive Base excludes respondents who answered Don t know. * Numbers reflect the percentage of respondents who answered. Respondents answering Remain unchanged are not displayed. ** Manufacturing and industrials includes chemicals, engineering, infrastructure and materials; Health care includes pharmaceuticals, biotechnology and life sciences; transport includes automotive and shipping Page 1

19 Outlook of retail and consumer lending policies (1/2) How do you expect the retail and consumer lending policies of banks in your market to change in each of the following sectors over the next 12 months?* Personal loans Business loans Mortgage lending Austria Austria 5 Belgium Belgium 1 France France Germany Germany Ireland 3 Ireland 5 1 Italy 6 Italy 5 6 herlands herlands Nordics 46 Nordics Poland 2 2 Poland 1 1 Spain Spain Switzerland Switzerland UK 4 26 UK 3 55 Less restrictive More restrictive Base excludes respondents who answered Don t know. * Numbers reflect the percentage of respondents who answered. Respondents answering Remain unchanged are not displayed Page 19

20 Outlook of retail and consumer lending policies (2/2) How do you expect the retail and consumer lending policies of banks in your market to change in each of the following sectors over the next 12 months?* Credit cards Other forms of unsecured personal credit Peer-to-peer lending Austria Austria Belgium Belgium France France Germany Germany Ireland 5 Ireland Italy 9 46 Italy 23 3 herlands herlands Nordics Nordics 9 64 Poland 99 3 Poland Spain Spain Switzerland Switzerland UK UK 4 3 Less restrictive More restrictive Base excludes respondents who answered Don t know. * Numbers reflect the percentage of respondents who answered. Respondents answering Remain unchanged are not displayed Page

21 Strategic priorities (1/6) Rank the importance of the following agenda items for your organization* Meeting Regulatory compliance and reporting standards 2 Managing reputational risk, including conduct and culture risks Optimizing customer channels Strategic efficiency and cost reduction3 Recruiting and retaining key talent 4 Investing in new customer-facing technology Complying with consumer regulation issues Leveraging new technologies for efficiency Enhancing Cybersecurity/data security Meeting tax compliance information reporting requirements Managing the threat of financial crime Meeting capital, liquidity and the leverage ratio requirements 5 Rationalizing physical footprint Simplifying/restructuring business operations or legal entities Improving asset quality and credit risks6 Improving risk management Developing/introducing new products Optimizing the balance sheet Short term cost cutting Developing partnerships with disruptors/ FinTech companies Managing tax risk Simplifying product portfolios Enhancing enterprise risk management Expanding into new foreign markets/internationalization Establishing new business segments Developing new pay / remuneration systems Managing diversity Off-shoring Outsourcing Collaborating with peers to develop industry utilities Developing partnerships with other financial organizations Acquiring new assets or businesses Tax optimisation Disposing of assets or businesses 1 Austria Meeting Regulatory 1 compliance and reporting standards Managing reputational risk, including conduct and culture Optimizing customer 1 channels (digitization and focus on self- Strategic efficiency and cost reduction, e.g. Streamlining 5 Recruiting and retaining key talent Investing in new 1 customer-facing technology (e.g. mobile Complying with consumer 1regulation issues and/or dealing Leveraging 5 new technologies for efficiency (e.g. robotic Enhancing Cybersecurity/data security Meeting tax compliance information reporting requirements Managing the threat of financial crime Meeting capital, 1 liquidity and the leverage ratio requirements Rationalizing physical footprint (e.g. branch Simplifying/restructuring the business operations or legal Improving asset quality and credit risks (e.g. credit Improving risk management (e.g. improve risk Developing/introducing new products Optimizing the balance sheet Short term cost cutting, e.g. Minimizing all non-essential Developing 5 partnerships with industry disruptors/ FinTech Managing tax risk Simplifying product portfolios Enhancing enterprise risk management for a portfolio view of Expanding into new foreign markets/internationalization Establishing new business segments Developing new pay / remuneration systems (including Managing diversity, e.g. promoting gender diversity on the Off-shoring Outsourcing Collaborating with peers to develop industry utilities Developing partnerships or joint ventures with other financial Acquiring new assets or businesses Tax optimisation Disposing of assets or businesses Belgium Grow Optimize Protect Control Reshape Base excludes respondents answering Does not apply. *Respondents were asked to rank the importance of activities on a scale of to 1, where denotes Not at all important and 1 denotes Very important. Numbers show the percentage of respondents selecting either, 9 or E.g., for IFRS reporting/harmonization, Basel III, MiFID II/EMIR, IFRS9, BCBS239, other country-specific regulations; 2 - E.g., to avoid potential criminal sanctions or reputational damage; 3 - E.g., Streamlining processes/further standardizing and resolving legacy IT issues; 4 - E.g., mobile solutions, Internet of Things, robo-advisors, artificial intelligence; 5 - E.g., branch closures/transformation, infrastructure/data center consolidations; 6 - E.g., credit processes, stress testing, underwriting methodologies, monitoring of credit and market exposures; - E.g., improve risk controls/processes/standards/accountability, financial control and performance management, audit management; - E.g., promoting gender diversity on the management board Page 21

22 Strategic priorities (2/6) Rank the importance of the following agenda items for your organization* France Germany Meeting Regulatory compliance and reporting standards 2 Managing reputational risk, including conduct and culture risks Optimizing customer channels Strategic efficiency and cost reduction3 Recruiting and retaining key talent 4 Investing in new customer-facing technology Complying with consumer regulation issues Leveraging new technologies for efficiency Enhancing Cybersecurity/data security Meeting tax compliance information reporting requirements Managing the threat of financial crime Meeting capital, liquidity and the leverage ratio requirements 5 Rationalizing physical footprint Simplifying/restructuring business operations or legal entities Improving asset quality and credit risks6 Improving risk management Developing/introducing new products Optimizing the balance sheet Short term cost cutting Developing partnerships with disruptors/ FinTech companies Managing tax risk Simplifying product portfolios Enhancing enterprise risk management Expanding into new foreign markets/internationalization Establishing new business segments Developing new pay / remuneration systems Managing diversity Off-shoring Outsourcing Collaborating with peers to develop industry utilities Developing partnerships with other financial organizations Acquiring new assets or businesses Tax optimisation Disposing of assets or businesses 1 Meeting Regulatory 5compliance and reporting standards (e.g. Managing reputational 5 risk, including conduct and culture Optimizing customer 1 channels (digitization and focus on self- Strategic efficiency 5 and cost reduction, e.g. Streamlining 63 Recruiting and retaining key talent Investing in new customer-facing technology (e.g. mobile Complying with 1consumer regulation issues and/or dealing Leveraging 5 new technologies for efficiency (e.g. robotic Enhancing Cybersecurity/data security Meeting tax compliance 5 information reporting requirements 63 Managing the threat of financial crime Meeting capital, liquidity and the leverage ratio requirements 5 Rationalizing physical footprint (e.g. branch Simplifying/restructuring 62 the business operations or legal Improving asset quality and credit risks (e.g. credit Improving risk management (e.g. improve risk Developing/introducing new products Optimizing the balance sheet 3 Short term cost cutting, e.g. Minimizing all non-essential Developing partnerships with industry disruptors/ FinTech Managing tax risk Simplifying product portfolios Enhancing enterprise risk management for a portfolio view of Expanding into new foreign markets/internationalization 3 Establishing new business segments Developing new pay / remuneration systems (including Managing diversity, e.g. promoting gender diversity on the Off-shoring Outsourcing Collaborating with peers to develop industry utilities Developing partnerships or joint ventures with other financial Acquiring new assets or businesses Tax optimisation Disposing of assets or businesses Grow Optimize Protect Control Reshape Base excludes respondents answering Does not apply. *Respondents were asked to rank the importance of activities on a scale of to 1, where denotes Not at all important and 1 denotes Very important. Numbers show the percentage of respondents selecting either, 9 or E.g., for IFRS reporting/harmonization, Basel III, MiFID II/EMIR, IFRS9, BCBS239, other country-specific regulations; 2 - E.g., to avoid potential criminal sanctions or reputational damage; 3 - E.g., Streamlining processes/further standardizing and resolving legacy IT issues; 4 - E.g., mobile solutions, Internet of Things, robo-advisors, artificial intelligence; 5 - E.g., branch closures/transformation, infrastructure/data center consolidations; 6 - E.g., credit processes, stress testing, underwriting methodologies, monitoring of credit and market exposures; - E.g., improve risk controls/processes/standards/accountability, financial control and performance management, audit management; - E.g., promoting gender diversity on the management board Page

23 Strategic priorities (3/6) Rank the importance of the following agenda items for your organization* Meeting Regulatory compliance and reporting standards Managing reputational risk, including conduct and culture risks Optimizing customer channels Strategic efficiency and cost reduction3 Recruiting and retaining key talent Investing in new customer-facing technology Complying with consumer regulation issues Leveraging new technologies for efficiency Enhancing Cybersecurity/data security Meeting tax compliance information reporting requirements Managing the threat of financial crime Meeting capital, liquidity and the leverage ratio requirements 5 Rationalizing physical footprint Simplifying/restructuring business operations or legal entities Improving asset quality and credit risks Improving risk management Developing/introducing new products Optimizing the balance sheet Short term cost cutting Developing partnerships with disruptors/ FinTech companies Managing tax risk Simplifying product portfolios Enhancing enterprise risk management Expanding into new foreign markets/internationalization Establishing new business segments Developing new pay / remuneration systems Managing diversity Off-shoring Outsourcing Collaborating with peers to develop industry utilities Developing partnerships with other financial organizations Acquiring new assets or businesses Tax optimisation Disposing of assets or businesses Ireland Italy Meeting Regulatory compliance and reporting standards (e.g. 93 Managing reputational 5 risk, including conduct and culture Optimizing customer channels (digitization and focus on self- 1 Strategic 63 efficiency and cost reduction, e.g. Streamlining Recruiting and retaining key talent 3 Investing 3 in new customer-facing technology (e.g. mobile Complying 5with consumer regulation issues and/or dealing Leveraging new technologies for efficiency (e.g. robotic 9 Enhancing Cybersecurity/data security Meeting tax compliance information reporting requirements 63 Managing the threat of financial crime 53 Meeting capital, 63 liquidity and the leverage ratio requirements 3 Rationalizing physical footprint (e.g. branch 62 Simplifying/restructuring the business operations or legal Improving 5 asset quality and credit risks (e.g. credit 3 Improving risk management (e.g. improve risk 3 Developing/introducing new products 53 Optimizing the balance sheet 53 Short term cost cutting, e.g. Minimizing all non-essential Developing partnerships with industry disruptors/ FinTech 36 Managing tax risk 3 Simplifying product portfolios 3 Enhancing enterprise risk management for a portfolio view of Expanding into new foreign markets/internationalization 31 Establishing new business segments Developing new pay / remuneration systems (including Managing diversity, e.g. promoting gender diversity on the 2 Off-shoring 1 Outsourcing 2 Collaborating with peers to develop industry utilities Developing partnerships or joint ventures with other financial 3 Acquiring new assets or businesses Tax optimisation Disposing of assets or businesses Grow Optimize Protect Control Reshape Base excludes respondents answering Does not apply. *Respondents were asked to rank the importance of activities on a scale of to 1, where denotes Not at all important and 1 denotes Very important. Numbers show the percentage of respondents selecting either, 9 or E.g., for IFRS reporting/harmonization, Basel III, MiFID II/EMIR, IFRS9, BCBS239, other country-specific regulations; 2 - E.g., to avoid potential criminal sanctions or reputational damage; 3 - E.g., Streamlining processes/further standardizing and resolving legacy IT issues; 4 - E.g., mobile solutions, Internet of Things, robo-advisors, artificial intelligence; 5 - E.g., branch closures/transformation, infrastructure/data center consolidations; 6 - E.g., credit processes, stress testing, underwriting methodologies, monitoring of credit and market exposures; - E.g., improve risk controls/processes/standards/accountability, financial control and performance management, audit management; - E.g., promoting gender diversity on the management board Page 23

24 Strategic priorities (4/6) Rank the importance of the following agenda items for your organization* herlands 1 Meeting Regulatory compliance and reporting standards Meeting Regulatory compliance and reporting standards (e.g. for 2 Managing reputational risk, including conduct and culture risks Managing reputational risk, including conduct and culture risks 53 Optimizing customer channels Optimizing customer channels (digitization and focus on self-serve) 9 3 Strategic efficiency and cost reduction Strategic efficiency and cost reduction, e.g. Streamlining Recruiting and retaining key talent Recruiting and retaining key talent 4 Investing in new customer-facing technology Investing in new customer-facing technology (e.g. mobile 5 Complying with consumer regulation issues Complying with consumer 1 regulation issues and/or dealing with 62 Leveraging new technologies for efficiency Leveraging 3 new technologies for efficiency (e.g. robotic automation) Enhancing Cybersecurity/data security Enhancing Cybersecurity/data security 4 Meeting tax compliance information reporting requirements Meeting tax compliance information reporting requirements 62 Managing the threat of financial crime Managing the threat of financial crime 4 Meeting capital, liquidity and the leverage ratio requirements Meeting capital, liquidity and the leverage ratio requirements 5 5 Rationalizing physical footprint Rationalizing physical footprint (e.g. branch 3 Simplifying/restructuring business operations or legal entities Simplifying/restructuring the business operations or legal entities 5 Improving asset quality and credit risks6 Improving asset quality and credit risks (e.g. credit processes, Improving risk management Improving risk management (e.g. improve risk 4 Developing/introducing new products Developing/introducing new products Optimizing the balance sheet Optimizing the balance sheet 69 Short term cost cutting Short term cost cutting, e.g. Minimizing all non-essential expenditure Developing partnerships with disruptors/ FinTech companiesdeveloping 3partnerships with industry disruptors/ FinTech companies 46 Managing tax risk Managing tax risk 31 Simplifying product portfolios Simplifying product portfolios 4 Enhancing enterprise risk management Enhancing enterprise risk management for a portfolio view of total Expanding into new foreign markets/internationalization Expanding into new foreign markets/internationalization Establishing new business segments Establishing new business segments Developing new pay / remuneration systems Developing new pay / remuneration systems (including emerging Managing diversity 1 Managing diversity, e.g. promoting gender diversity on the Off-shoring Off-shoring 9 Outsourcing Outsourcing 23 Collaborating with peers to develop industry utilities 1 Collaborating with peers to develop industry utilities 2 Developing partnerships with other financial organizations 1 Developing partnerships or joint ventures with other financial Acquiring new assets or businesses Acquiring new assets or businesses Tax optimisation Tax optimisation Disposing of assets or businesses 1 Disposing of assets or businesses 31 Nordics Grow Optimize Protect Control Reshape Base excludes respondents answering Does not apply. *Respondents were asked to rank the importance of activities on a scale of to 1, where denotes Not at all important and 1 denotes Very important. Numbers show the percentage of respondents selecting either, 9 or E.g., for IFRS reporting/harmonization, Basel III, MiFID II/EMIR, IFRS9, BCBS239, other country-specific regulations; 2 - E.g., to avoid potential criminal sanctions or reputational damage; 3 - E.g., Streamlining processes/further standardizing and resolving legacy IT issues; 4 - E.g., mobile solutions, Internet of Things, robo-advisors, artificial intelligence; 5 - E.g., branch closures/transformation, infrastructure/data center consolidations; 6 - E.g., credit processes, stress testing, underwriting methodologies, monitoring of credit and market exposures; - E.g., improve risk controls/processes/standards/accountability, financial control and performance management, audit management; - E.g., promoting gender diversity on the management board Page 24

25 Strategic priorities (5/6) Rank the importance of the following agenda items for your organization* Meeting Regulatory compliance and reporting standards 2 Managing reputational risk, including conduct and culture risks Optimizing customer channels 3 Strategic efficiency and cost reduction Recruiting and retaining key talent 4 Investing in new customer-facing technology Complying with consumer regulation issues Leveraging new technologies for efficiency Enhancing Cybersecurity/data security Meeting tax compliance information reporting requirements Managing the threat of financial crime Meeting capital, liquidity and the leverage ratio requirements 5 Rationalizing physical footprint Simplifying/restructuring business operations or legal entities Improving asset quality and credit risks6 Improving risk management Developing/introducing new products Optimizing the balance sheet Short term cost cutting Developing partnerships with disruptors/ FinTech companies Managing tax risk Simplifying product portfolios Enhancing enterprise risk management Expanding into new foreign markets/internationalization Establishing new business segments Developing new pay / remuneration systems Managing diversity Off-shoring Outsourcing Collaborating with peers to develop industry utilities Developing partnerships with other financial organizations Acquiring new assets or businesses Tax optimisation Disposing of assets or businesses 1 Poland Meeting 64Regulatory compliance and reporting standards Managing 3 reputational risk, including conduct and culture Optimizing 45 customer channels (digitization and focus on Strategic 45 efficiency and cost reduction, e.g. Streamlining 55 Recruiting and retaining key talent Investing in new customer-facing technology (e.g. mobile Complying 64with consumer regulation issues and/or dealing Leveraging new technologies for efficiency (e.g. robotic 64 Enhancing Cybersecurity/data security Meeting 55tax compliance information reporting requirements 55 Managing the threat of financial crime Meeting capital, 3liquidity and the leverage ratio requirements Rationalizing physical footprint (e.g. branch 2 Simplifying/restructuring the business operations or legal Improving asset quality and credit risks (e.g. credit 55 Improving risk management (e.g. improve risk 2 Developing/introducing new products 36 Optimizing the balance sheet 2 Short term cost cutting, e.g. Minimizing all non-essential 2Developing partnerships with industry disruptors/ FinTech 36 Managing tax risk 1 Simplifying product portfolios Enhancing 45 enterprise risk management for a portfolio view Expanding into new foreign markets/internationalization 9 Establishing new business segments 1 Developing new pay / remuneration systems (including Managing diversity, e.g. promoting gender diversity on the Off-shoring 9 Outsourcing 1 Collaborating with peers to develop industry utilities Developing partnerships or joint ventures with other Acquiring new assets or businesses Tax optimisation 3 Disposing of assets or businesses Spain 3 3 Grow Optimize Protect Control Reshape Base excludes respondents answering Does not apply. *Respondents were asked to rank the importance of activities on a scale of to 1, where denotes Not at all important and 1 denotes Very important. Numbers show the percentage of respondents selecting either, 9 or E.g., for IFRS reporting/harmonization, Basel III, MiFID II/EMIR, IFRS9, BCBS239, other country-specific regulations; 2 - E.g., to avoid potential criminal sanctions or reputational damage; 3 - E.g., Streamlining processes/further standardizing and resolving legacy IT issues; 4 - E.g., mobile solutions, Internet of Things, robo-advisors, artificial intelligence; 5 - E.g., branch closures/transformation, infrastructure/data center consolidations; 6 - E.g., credit processes, stress testing, underwriting methodologies, monitoring of credit and market exposures; - E.g., improve risk controls/processes/standards/accountability, financial control and performance management, audit management; - E.g., promoting gender diversity on the management board Page

26 Strategic priorities (6/6) Rank the importance of the following agenda items for your organization* Meeting Regulatory compliance and reporting standards Meeting 1 Regulatory compliance and reporting standards (e.g. for IFRS Managing 2 Managing reputational risk, including conduct and culture risks reputational risk, including conduct and culture risks (e.g. to avoid Optimizing customer channels Optimizing customer channels (digitization and focus on self-serve) Strategic efficiency and cost reduction Strategic 3 efficiency and cost reduction, e.g. Streamlining processes/further Recruiting and retaining key talent 1 Recruiting and retaining key talent Investing 4 Investing in new customer-facing technology in new customer-facing technology (e.g. mobile solutions, Internet Complying with consumer regulation issues Complying with consumer regulation issues and/or dealing with remediation Leveraging new technologies for efficiency Leveraging new technologies for efficiency (e.g. robotic automation) Enhancing Cybersecurity/data security Enhancing Cybersecurity/data security Meeting tax compliance information reporting requirements Meeting tax compliance information reporting requirements (FATCA, CRS) Managing the threat of financial crime 1 Managing the threat of financial crime Meeting capital, liquidity and the leverage ratio requirements Meeting capital, liquidity and the leverage ratio requirements 5 Rationalizing physical footprint Rationalizing physical 5 footprint (e.g. branch closures/transformation, Simplifying/restructuring business operations or legal entities Simplifying/restructuring the business operations or legal entities Improving asset quality and credit Improving risks6 asset quality and credit risks (e.g. credit processes, stress testing, Improving risk management Improving risk management (e.g. improve risk Developing/introducing new products Developing/introducing new products Optimizing the balance sheet Optimizing the balance sheet Short term cost cutting Short term cost cutting, e.g. Minimizing all non-essential expenditure Developing partnerships with disruptors/ FinTech companiesdeveloping partnerships with industry disruptors/ FinTech companies Managing tax risk Managing tax risk Simplifying product portfolios Simplifying product portfolios Enhancing enterprise risk managementenhancing enterprise risk management for a portfolio view of total risk Expanding into new foreign markets/internationalization Expanding into new foreign markets/internationalization Establishing new business segments Establishing new business segments Developing new pay / remuneration systems Developing new pay / remuneration systems (including emerging legislation) Managing diversity Off-shoring Outsourcing Collaborating with peers to develop industry utilities Developing partnerships with other financial organizations Acquiring new assets or businesses Tax optimisation Disposing of assets or businesses Switzerland Managing diversity, e.g. promoting gender diversity on the management board Off-shoring Outsourcing Collaborating with peers to develop industry utilities Developing partnerships or joint ventures with other financial organizations Acquiring new assets or businesses Tax optimisation Disposing of assets or businesses UK Grow Optimize Protect Control Reshape Base excludes respondents answering Does not apply. *Respondents were asked to rank the importance of activities on a scale of to 1, where denotes Not at all important and 1 denotes Very important. Numbers show the percentage of respondents selecting either, 9 or E.g., for IFRS reporting/harmonization, Basel III, MiFID II/EMIR, IFRS9, BCBS239, other country-specific regulations; 2 - E.g., to avoid potential criminal sanctions or reputational damage; 3 - E.g., Streamlining processes/further standardizing and resolving legacy IT issues; 4 - E.g., mobile solutions, Internet of Things, robo-advisors, artificial intelligence; 5 - E.g., branch closures/transformation, infrastructure/data center consolidations; 6 - E.g., credit processes, stress testing, underwriting methodologies, monitoring of credit and market exposures; - E.g., improve risk controls/processes/standards/accountability, financial control and performance management, audit management; - E.g., promoting gender diversity on the management board Page 26

27 Headcount change Over the next 12 months, how do you expect the headcount of your bank to change?* increase Austria 1 5 Belgium 44 - France 3 - Germany - Ireland 3 Italy - herlands 1 - Nordics -53 Poland - Spain - Switzerland - UK 46 - Decrease significantly Decrease slightly Increase slightly Increase significantly Base excludes respondents answering Don t know/depends. * Numbers reflect the percentage of respondents who answered. Respondents answering Stay the same are not displayed. Page 2

28 Headcount change Over the next 12 months, how do you expect the headcount of your bank to change?* Austria increase Belgium increase Asset management Asset management - Private banking and wealth management Private banking and wealth management 44 - Compliance, risk and finance Compliance, risk and finance Other head office functions - Other head office functions - Corporate banking Corporate banking - Investment banking Investment banking - Operations and IT Operations and IT Retail and business banking Retail and business banking 44 - Administration - Administration Decrease Increase Base excludes respondents answering Don t know/depends. * Numbers reflect the percentage of respondents who answered. Respondents answering Stay the same are not displayed. Page 2

29 Headcount change Over the next 12 months, how do you expect the headcount of your bank to change?* France increase Germany increase Asset management Asset management Private banking and wealth management Private banking and wealth management - Compliance, risk and finance Compliance, risk and finance - Other head office functions - Other head office functions Corporate banking Corporate banking - Investment banking Investment banking - Operations and IT - Operations and IT - Retail and business banking - Retail and business banking - Administration - Administration 3-3 Decrease Increase Base excludes respondents answering Don t know/depends. * Numbers reflect the percentage of respondents who answered. Respondents answering Stay the same are not displayed. Page

30 Headcount change Over the next 12 months, how do you expect the headcount of your bank to change?* Ireland increase Italy increase Asset management Asset management Private banking and wealth management - Private banking and wealth management Compliance, risk and finance - Compliance, risk and finance Other head office functions - Other head office functions Corporate banking - Corporate banking - Investment banking - Investment banking Operations and IT 5 Operations and IT - Retail and business banking - Retail and business banking -42 Administration - Administration - Decrease Increase Base excludes respondents answering Don t know/depends. * Numbers reflect the percentage of respondents who answered. Respondents answering Stay the same are not displayed. Page 3

31 Headcount change Over the next 12 months, how do you expect the headcount of your bank to change?* herlands increase Nordics increase Asset management 1-1 Asset management Private banking and wealth management - Private banking and wealth management Compliance, risk and finance Compliance, risk and finance Other head office functions 3-3 Other head office functions 21 - Corporate banking 1 1 Corporate banking Investment banking 1 1 Investment banking Operations and IT 3 - Operations and IT 36 - Retail and business banking - Retail and business banking Administration 1-3 Administration -36 Decrease Increase Base excludes respondents answering Don t know/depends. * Numbers reflect the percentage of respondents who answered. Respondents answering Stay the same are not displayed. Page 31

32 Headcount change Over the next 12 months, how do you expect the headcount of your bank to change?* Poland increase Spain increase Asset management Asset management Private banking and wealth management Private banking and wealth management Compliance, risk and finance - Compliance, risk and finance Other head office functions - Other head office functions - Corporate banking - Corporate banking - Investment banking - Investment banking - Operations and IT Operations and IT - Retail and business banking 44 - Retail and business banking - Administration - Administration - Decrease Increase Base excludes respondents answering Don t know/depends. * Numbers reflect the percentage of respondents who answered. Respondents answering Stay the same are not displayed. Page 32

33 Headcount change Over the next 12 months, how do you expect the headcount of your bank to change?* Switzerland increase UK increase Asset management Asset management Private banking and wealth management - Private banking and wealth management - Compliance, risk and finance - Compliance, risk and finance Other head office functions Other head office functions Corporate banking Corporate banking 3-31 Investment banking - Investment banking Operations and IT Operations and IT Retail and business banking - Retail and business banking Administration - Administration 46-3 Decrease Increase Base excludes respondents answering Don t know/depends. * Numbers reflect the percentage of respondents who answered. Respondents answering Stay the same are not displayed. Page