European Bank Barometer

European Bank Barometer
Weaker confidence and continued internal
focus makes for a poor 2013 outlook

Autumn 2012

About the study

Ernst & Young’s European Banking Barometer is a bi-annual study to determine the views of senior
bankers across the major banking markets in Europe. The research focuses on the current macro-
economic environment and how it will impact their organization and the banking industry as a whole over
the next six months.
The Autumn / Winter 2012 Barometer consists of 269 interviews with senior bankers across 11 markets
in Europe – Austria, Belgium, France, Germany, Italy, the Netherlands, the Nordics, Poland, Spain,
Switzerland and the UK.
The fieldwork, consisting of telephone interviews and online questionnaires, was conducted throughout
Autumn 2012 by two external research agencies on Ernst & Young’s behalf. The aim was to interview
senior bankers at a range of institutions representing at least 50% of the market, defined as assets
owned.
Interviews were not conducted with subsidiaries of member / group banks, and a range of bank types
were interviewed in each market to ensure a fair reflection of the industry in each country.
The results are presented in an aggregate format and shown in percentages. Please note that where
charts do not add up to 100%, it is because participants either chose not to answer the question or
selected ‘Don’t know’ or ‘Not applicable’ as their answer. Where possible we've compared answers
against those given in Spring 2012 but some questions have changed or are new.
We would like to thank all the research participants for their contribution to the study.

Page 2 European Bank Barometer Survey results: Belgium

European Overview

Further cost cutting measures, restricted lending and consolidation pressures will define an even more cautious
banking industry in the next six months.
Cost cutting to bite in first half of 2013 with more job losses as crisis refuses to fade
► Cost cutting is now second only to compulsory regulation and risk management in European banks’ priority list.
► Cutting costs, streamlining processes and minimizing non-essential spend are all now in the top five priorities of banks
for the next six months.
► Forty-five percent of European banks expect headcount to decrease in the next six months as they struggle to control
costs in the low-growth environment.
► Banks in the Netherlands and the UK will be worst affected with 70% and 64% of banks respectively expecting to
decrease their headcount.
► Banks in the Nordics are more optimistic but even in this region 22% are expecting to reduce headcount.
► Most cuts will be in head office functions with 58% of banks expecting cuts in this area.
► The biggest cuts are expected from the universal and corporate / investment banking sectors, where over half of
respondents expect to make headcount reductions.
Growing concerns about the European economy and sovereign debt crisis dominate the industry
► There are rising concerns about the impact of the Eurozone debt crisis in the next six months.
► Banks in Spain, France, Switzerland and Italy are most worried. Banks in the Netherlands and Belgium are the least
worried.
► Macro-economic worries continue to dominate the European banking industry with banks split on whether their
economy will remain the same (40%) or worsen (42%).
► The outlook is worse now then when we launched the Spring 2012 edition of the European Banking Barometer.


European Overview

Actions in 2013 will result in fewer banks, many of them much smaller, as they struggle with current business
models and the capital intensive environment
► The industry will be reshaped through consolidation, asset sales and joint ventures, with 47% of banks expecting to
see significant consolidation happening in their markets within the next three years.
► Almost all Swiss respondents and 78% of Spanish respondents anticipate consolidation, but just 1 in 10 in the UK,
and none in Belgium do.
► Industry consolidation is most anticipated in wealth management and private banking. Specialist banks are least likely
to see consolidation.
► Some 30% of banks surveyed intend to sell assets in the next six months, with Spanish and UK banks likely to be the
most active.
Banks are placing renewed emphasis on increasing cash reserves and deleveraging
► Pressure to build capital buffers means that banks are pushing to increase the size of their cash reserves through a
mix of actions.
► Fifty-six percent plan to introduce more incentives to boost customer deposits, heightening the war for deposits in
some markets.
► Fifty-three percent are aiming to reduce the size of their balance sheet.
Credit remains tight across Europe and banks are increasingly nervous about the impact of non-performing
loans on their books, which is having a knock-on effect on their lending policies
► Eighty-five percent of banks expect provisions to remain at their current level or increase in the short-term.
► Worst hit are Poland, Spain and Italy where 67%, 56% and 54% of respondents respectively expect to increase
provisions. Best performing are the Nordics where only 23% expect an increase in provisions, closely followed by 30%
in Austria and 32% in the UK.


Economic environment & financial markets


Belgian banks less confident than European average

How do you expect the general economic outlook in your country to change over the next six
months?
Autumn 2012 Spring 2012
100 2
24
80 28

60 36
43
40

20 36
24
4 3
0
Belgium Europe
Very negative Slightly negative
Neutral Slightly positive
Very positive

Percentage of respondents answering Spring 2012: What’s your outlook for the business environment over the
next six months?

Comments:
• Compared to Spring 2012 Belgian banks have become less confident


European banks show indications of a fall in optimism
regarding the economic outlook over the next six months
How do you expect the general economic outlook in your country to change over the next six
months?
Austria 20 80 Austria 24 41 35
Belgium 67 33 Belgium 24 36 40
Europe 19 39 41 Europe 30 43 27
France 37 11 52 France 28 40 32
Germany 4 48 48 Germany 29 49 22
Italy 38 36 26 Italy 34 42 24
Netherlands 11 47 42 Netherlands 31 42 27
Nordics 26 48 26 Nordics 25 44 31
Poland 6 17 78 Poland 18 63 18
Spain 11 30 59 Spain 38 28 34
Switzerland 4 59 37 Switzerland 13 63 25
UK 41 27 32 UK 51 43 6
0 20 40 60 80 100 0 20 40 60 80 100

Improve Remain at today’s levels Worsen Positive Neutral Negative

Percentage of respondents answering Spring 2012: What’s your outlook for the business environment over the
next six months?

Comments:
• Compared to Spring 2012 Belgian banks have become less optimistic in Autumn 2012. None of the Belgian
banks expects the economy to improve in the next six months.
• UK is most optimistic with 41% foreseeing an improvement, closely followed by Italy and France. Poland is
the most pessimistic country: 78% worsening.


European debt crisis


Belgian banks expect a decreased impact of the
sovereign debt crisis over the next six months
What level of impact do you think the Eurozone sovereign debt crisis will have on the banking
sector in your country over the next six months, in comparison to the previous six months?
100 100
9
17
30
80 26 80 42

60 50 60
42
40 45 40 38

20 33 20
17 28 20
0 3 0
Belgium Europe Belgium Europe
Significantly decreased impact Slightly decreased impact No impact Yes, a minor impact Yes, a substantial impact
About the same Slightly increased impact
Significantly increased impact

Comments:
• Compared to the Europe, Belgian banks are much more optimistic. 20% of the European banks expect a
decreased impact against 83% of the Belgian banks.
• In Europe 35% of the banks expect an increased impact of the sovereign debt crisis over the next six months


Although there is a slight improvement in the sentiment
at a European level, there are some notable exceptions
What level of impact do you think the Eurozone sovereign debt crisis will have on the banking
sector in your country over the next six months, in comparison to the previous six months?
(cont’d)

Austria 20 50 30 Austria 64 28 8
Europe 35 45 20 Europe 42 38 20
France 44 41 15 France 28 54 18
Italy 44 31 26 Italy 44 34 22
Poland 17 72 11 Poland 42 48 10
Spain 67 11 22 Spain 56 24 20
UK 36 55 9 UK 33 41 27
0 20 40 60 80 100 0 20 40 60 80 100
Increased About the same Decreased Yes, a substantial impact Yes, a minor impact No impact

Comments:
• Belgium is the most optimistic country with 83% of the banks foreseeing a decreased impact of the sovereign
debt crisis. Spain is by far the most pessimistic country with 67% of the banks foreseeing an increased impact.
• Besides Belgium, in Autumn 2012 the Netherlands is the only country with more banks expecting an decreased
impact than an increased impact (25% decreased vs 15% increased)


Business outlook and focus areas


Belgian banks less confident than in Spring 2012

How do you expect your bank’s overall performance to change over the next six months?

100 5 100
20 23
80 32 80
50
60 60

39 70 67
40 40
50
20 20
21
10 10 0,2
0 3 0
Weaken significantly Weaken slightly Very poorly Fairly poorly Fairly well Very well
Stay the same Strengthen slightly
Strengthen significantly

Comments:
• Confidence levels of Belgian banks decreased sharply. In Spring 2012 10% of the banks expected that their
performance would weaken over the next six months, against 50% in Autumn 2012.
• Compared to European levels Belgian banks became much less confident in Autumn 2012, while in Spring 2012
the outlook of Belgian banks was almost identical to the European levels


Major changes in sentiment were evident across Europe

How do you expect your bank’s overall performance to change over the next six months?
(cont’d)
Austria 44 33 22 Austria 6 68 26
Europe 5 32 39 21 3 Europe 23 67 10 0,2
France 4 26 41 26 4 France 16 74 10
Germany 2 23 35 33 6 Germany 14 69 16
Italy 13 38 38 10 Italy 18 76 6
Netherlands 25 45 15 15 Netherlands 32 64 4
Poland 6 18 29 41 6 Poland 50 48 2
Spain 7 30 41 22 Spain 35 53 10 2
Switzerland 4 31 50 15 Switzerland 13 63 25
UK 59 32 9 UK 24 68 8
0 20 40 60 80 100 0 20 40 60 80 100

Strengthen significantly Strengthen slightly Very well Fairly well Fairly poorly Very poorly
Stay the same Weaken slightly
Weaken significantly

Comments:
• The UK is most optimistic with 59% saying the performance will strengthen.
• Polish and Dutch banks changed from the most positive outlook in Spring 2012 to the countries with the slightest
positivity in Autumn 2012.


Banks are reacting to continued economic uncertainty
by increasing loan loss provisions...

Over the next six months, what do you expect your bank’s total provisions against loan losses to
do?
Autumn 2012
Austria 10 20 40 30
9
Belgium 67 33
Europe 9 35 41 12 2
35 France 7 33 37 19 4
Germany 6 40 42 8 4
Italy 18 36 33 13
Netherlands 10 20 45 20 5
Nordics 9 14 59 14 5
41
Poland 17 50 28 6
Spain 19 37 37 7
Switzerland 44 52 4
12
UK 32 45 23
2

Decrease significantly Decrease slightly Remain at current levels Increase slightly Increase significantly

Comments:
• The economic uncertainty is reflected in 44% of banks expecting loan loss provisions (LLPs) to increase
over the next 6 month and a further 41% expecting them to remain at their current (elevated) levels. While
LLPs remain high it is unlikely that banks will seek to increase lending significantly, constraining revenue
growth and potentially perpetuating the economic malaise.

Page 14 European Banking Barometer – Autumn / Winter 2012

And tightening lending policies

How do you expect the corporate lending policies of banks in your country to change in each of
the following sectors over the next six months?


Construction 40 22 Real estate 41 12
Commercial real estate 35 24 Construction 39 13
Transport (incl. automotive and shipping) 33 13 Services 38 10
Financial services 31 20 Retail 35 11
Retail and consumer products 27 16 Transport 33 12
SMEs 26 26 Infrastructure 33 12
Energy, mining and minerals 24 19 Automotive 32 10
Manufacturing and industrials (incl. chemicals, eng.) 22 22 Tech., media and telecomms 31 13
Media and telecommunications 21 17 Shipping 30 11
Commercial and professional services 20 19 Utilities 27 10
Information technology 20 25 Mechanical engineering 26 8
Healthcare 15 27 Commodities 26 11
Craft 25 13
Chemicals and pharmaceuticals 24 8
Other 12 10
More restrictive Less restrictive

Comments:
• The outlook for lending across a number of industries will weaken in 1H2013, with construction and
commercial real estate (CRE) looking particularly pessimistic. In addition to the relatively poor health of
these sectors, this also reflects the higher risk-weightings attached to CRE.


Construction and property will feel the greatest lending
policy tightening in 1H2013

the following sectors over the next six months?*
Austria Belgium France
Manufacturing* 40 20 Commercial services** Construction 47 16
Transport** 40 10 Information technology Financial services 42 16
Construction 30 30 Manufacturing** Commercial services** 32 21
Energy and mining 20 20 Retail** Energy and mining** 26 5
Healthcare 20 40 SMEs SMEs 26 37
SMEs 20 30 Transport** 33 Commercial real estate 21 26
Commercial services** 10 20 Commercial real estate 67 Manufacturing** 16 26
Financial services 10 20 Construction 67 Retail** 16 32
Media and telecomms 10 30 Energy and mining** 33 Transport** 16 11
Retail** 10 20 Financial services 33 Healthcare 11 47
Commercial real estate 30 Healthcare 33 Media and telecomms 11 37
Information technology 30 Media and telecomms 33 33 Information technology 5 32

Germany Italy Netherlands
Transport** 50 13 Construction 50 22 Commercial real estate 69 15
Energy and mining** 48 18 Commercial real estate 38 22 Construction 54 23
Financial services 40 10 Media and telecomms 34 19 Financial services 46 23
Retail** 30 15 Financial services 31 28 Transport** 46 15
Construction 25 30 Manufacturing** 31 19 Commercial services** 38 8
Commercial real estate 23 25 Energy and mining** 28 25 Media and telecomms 38 15
Information technology 23 30 Healthcare 28 25 Retail** 38
Media and telecomms 23 15 Transport** 28 13 Information technology 31 15
Manufacturing** 20 30 Commercial services** 25 22 SMEs 31 8
Commercial services** 18 15 Information technology 25 25 Healthcare 15 15
SMEs 18 38 Retail** 22 13 Manufacturing** 15
Healthcare 13 28 SMEs 22 22 Energy and mining** 8 23

* Numbers are percentage of respondents answering.
** Manufacturing includes industries, chemicals and engineering; Transport includes automotive and shipping, Retail includes consumer products, Energy and mining includes metails and commercial services includes professional services.
Where totals do not add up to 100%, remaining respondents answered ‘Remain unchanged' or ‘Don't know'. Where no data is shown all respondents answered ‘Remain unchanged' or ‘Don't know’.


Construction and property will feel the greatest lending
policy tightening in 1H2013

the following sectors over the next six months?*
Nordics Poland Spain

Commercial real estate 40 25 Construction 59 35 Construction 38 13
SMEs 40 5 Commercial real estate 53 35 Commercial real estate 31 25
Construction 30 25 Retail* 53 24 SMEs 31 38
Retail** 30 10 Commercial services** 41 12 Energy and mining 13 25
Transport** 30 5 SMEs 41 18 Financial services 13 25
Financial services 25 20 Transport** 41 24 Healthcare 13 38
Manufacturing** 25 15 Energy and mining** 35 18 Media and telecomms 13 19
Commercial services** 20 Financial services 35 29 Retail* 13 38
Energy and mining** 15 25 Media and telecomms 29 6 Transport** 13 6
Information technology 15 20 Healthcare 24 6 Information technology 6 50
Healthcare 10 25 Information technology 24 29 Manufacturing** 6 44
Media and telecomms 10 10 Manufacturing** 24 18 Commercial services** 31

Switzerland UK
Retail** 41 12 Commercial real estate 50 7
Commercial real estate 35 29 Construction 50
Information technology 35 12 Financial services 29 14
Manufacturing** 35 29 Information technology 29 7
Transport** 35 18 Transport** 29 21
SMEs 29 35 Media and telecomms 21 14
Construction 24 24 Retail** 21 7
Financial services 18 29 Commercial services** 14 21
Media and telecomms 12 6 SMEs 14 29
Commercial services** 6 47 Manufacturing** 7 14
Energy and mining** 6 24 Energy and mining** 14
Healthcare 6 41 Healthcare 7

** Manufacturing includes industries, chemicals and engineering; Transport includes automotive and shipping, Retail includes consumer products, Energy and mining includes metails and commercial services includes professional services.
Where totals do not add up to 100%, remaining respondents answered ‘Remain unchanged' or ‘Don't know'. Where no data is shown all respondents answered ‘Remain unchanged' or ‘Don't know’.


As well as shrinking their balance sheets, banks are
focused on making them stronger and more stable

How likely are the banks in your market to be engaged in the following activities over the next 6
months?
Autumn 2012
Introducing / increasing incentives to increase customer deposits 17 39 33 10 2

Reducing the size of the balance sheet 10 43 32 12 3

Reducing loan to deposit ratios 10 34 39 13 4

Seeking funding from wholesale capital markets 10 27 45 14 4

Accessing central bank funding programs 7 26 47 14 5

Selling assets outside the home market 9 28 43 12 7

Selling assets in markets outside Europe 7 28 43 13 9

Lending to customers 4 23 39 29 5

Significantly more Slightly more About the same Slightly less Signficantly less

Comments:
• As banks prepare for Basel III implementation there continues to be a heightened focus on stable deposits
and delivering the balance sheet. However, increased competition is likely to push up the cost of these
deposits and,
given the depressed economy, asset sales may not deliver the required returns.


Simplifying and strengthening the balance sheet will
continue to be a priority across Europe

months?*
Incentives to increase customer deposits 20 60 10 10 33 33 17 17 11 41 37 11

Reducing the balance sheet 30 60 10 17 33 17 33 11 56 26 44

Reducing loan to deposit ratios 30 50 10 10 17 17 67 11 56 22 7 4

Seeking funding from wholesale capital markets 30 70 50 50 26 15 44 11 4

Accessing central bank funding programs 20 70 10 17 83 4 41 37 11 7

Selling assets outside home market 10 20 60 10 17 17 67 19 30 41 7 4

Selling assets outside Europe 40 40 20 17 33 33 17 11 30 37 19 4

Lending to customers 70 30 33 50 17 11 19 30 41


Reducing the balance sheet 12 40 34 10 4 3 46 28 18 5 15 40 35 10

Reducing loan to deposit ratios 4 27 50 13 6 8 41 38 10 3 15 20 50 15

Seeking funding from wholesale capital markets 2 12 50 26 10 23 23 44 8 3 10 50 35 5

Accessing central bank funding programs 6 18 43 22 10 10 33 44 13 5 25 55 15

Selling assets outside home market 2 21 60 11 6 10 33 33 10 13 5 40 40 10 5

Selling assets outside Europe 4 26 55 13 2 3 28 44 18 8 5 50 40 5

Lending to customers 8 30 48 14 3 21 33 31 13 5 30 55 10

Significantly more Slightly more About the same Slightly less Significantly less



Simplifying and strengthening the balance sheet will
continue to be a priority across Europe

months?*

Reducing the balance sheet 4 22 52 13 9 6 61 11 22 15 44 19 22

Reducing loan to deposit ratios 4 26 61 9 22 39 11 22 6 15 41 11 26 7

Seeking funding from wholesale capital markets 39 39 22 17 28 44 11 11 41 33 11 4

Accessing central bank funding programs 22 61 9 9 6 22 50 11 11 22 41 30 44

Selling assets outside home market 4 70 17 9 11 56 11 22 15 59 22 4

Selling assets outside Europe 9 57 13 22 6 56 11 28 15 48 30 44

Lending to customers 4 26 48 22 6 11 11 56 17 7 30 37 26

Switzerland UK
Incentives to increase customer deposits 4 42 35 15 4 5 36 41 14 5

Reducing the balance sheet 11 37 41 7 4 18 36 45

Reducing loan to deposit ratios 7 33 33 22 4 9 14 68 5 5

Seeking funding from wholesale capital markets 4 19 62 4 12 9 32 45 14

Accessing central bank funding programs 4 11 63 19 4 14 32 32 23

Selling assets outside home market 12 27 19 31 12 14 36 36 14

Selling assets outside Europe 14 23 23 23 18 9 27 45 14 5

Lending to customers 37 44 11 7 23 36 32 9

Significantly more Slightly more About the same Slightly less Significantly less



European banks expect most of Deposits and Retail
Banking
How do you rate the outlook for your bank over the next six months in each of the following
business lines?
Europe – Autumn 2012 Europe – Spring 2012

Corporate banking 5 29 42 15 2 7 Corporate banking 34 38 11 3 15
Debt and equity issuance 3 20 40 18 7 11
Deposit business 39 44 8 3 7
Other 5 7 523 78 Other 22 36 11 2 29

Private wealth management/AM 5 27 36 16 5 11 Private wealth management/AM 28 41 10 2 19
Retail banking 9 37 32 12 3 7 Retail banking 37 44 8 1 11
Securities services 5 22 41 16 6 9
Securities trading 20 34 17 6 23
Securities trading 4 20 41 22 5 9
Transaction advisory (e.g., M&A) 3 15 44 16 9 13 Transaction advisory (e.g., M&A) 26 37 9 1 27

0 20 40 60 80 100 0 20 40 60 80 100
Very good Fairly good Good Fairly good Fairly poor Poor Does not apply
Neither good nor poor Fairly poor
Very poor Does not apply

Percentage of respondents answering
Please note, that chart may not add up to 100% due to the respondents not answering the respondent selecting ‘Don’t know’ or ‘Not applicable’

Comments:
• In Autumn as well as Spring 2012 the outlook for Deposit Business and Retail Banking is most positive.
• Overall the outlook for all business lines in Autumn 2012 is considered less optimistic than it was in Spring
2012


Banks will be net sellers of assets in 1H2013

Which, if any, of the following is your bank likely to consider over the next six months in relation
to the countries in which it operates?*

Autumn 2012
Austria 30 10 10 70

Belgium 17 33 50
34
Europe 30 18 29 34

France 33 56 26 22

Germany 18 12 18 52
29 Italy 38 10 33 28

Netherlands 30 15 50 15

18 Nordics 22 17 17 43

Poland 17 11 33 39

Spain 52 19 37 7
30 Switzerland 19 11 19 52

UK 55 18 41 23

None of these Partnerships or joint ventures Buy assets Sell assets
* Numbers are percentage of respondents answering (respondents could select more than one option).
Please note, chart may not add up to 100% due to respondents selecting ‘Don’t know’ or ‘Not applicable’.

Comments:
• Banks will continue to de-leverage during 1H2013 as they sell assets to reduce risk and build capital
ahead of Basel III implementation. In some geographies, the selling of assets has also been prompted
by competition regulation (e.g., UK) and attempts to stabilize the banking sector (e.g., Spain).


Employment


Half of Belgian banks expect headcount decrease over
next six months
Over the next six months, do you expect the headcount of your bank to … ?

Belgium Europe
100% 100% 3 3
24 17
22 18
80% 80%
33
60% 60% 34
58 58
40% 40%
50 37
20% 20%
18 15 2
0% 0% 8
Spring 2012 Autumn 2012 Spring 2012 Autumn 2012

Decrease significantly Decrease slightly Stay the same Increase slightly Increase significantly


Comments:
• Compared to Spring 2012 more Belgian banks expect to see their headcount decrease. From 18% in
Spring to 50% in Autumn 2012.
• Compared to the European average Belgian banks in Autumn 2012 have become much less positive
about headcount developments than they were in Spring.


Most European banks expect headcount decrease

Over the next six months, do you expect the headcount of your bank to … ? (cont’d)

Belgium 17 33 50 Belgium 24 58 18
Europe 21 34 45 Europe 25 58 17
France 19 41 41 France 38 56 6
Italy 33 23 44 Italy 20 72 8
Poland 11 33 56 Poland 23 61 16
Spain 26 37 37 Spain 14 54 32
UK 9 27 64 UK 36 52 12
0 20 40 60 80 100 0 20 40 60 80 100

Increase Stay the same Decrease


Comments:
• Only the Nordics expect headcount growth during the second half of 2012. In the first half of 2012, 9 out of
11 countries expected headcount growth.
• The Netherlands and UK see headcount shrinking considerably (70% and 64%).
• In Autumn 2012 in all European countries, more banks expect headcount decrease than in Spring 2012.


Head office and administrative functions will face the
biggest cutbacks

Which areas of the business do you expect headcount to be most impacted?*


Operations 19 20
Head office functions / admin 58 11
HR 17 12

Retail and business banking 39 54 Marketing 16 19

Retail 16 22
Investment banking 30 20
Other 15 9

Technology 15 17
Private wealth management / AM 20 27
Product / business unit 14 15

Corporate banking 19 11 Sales 14 31

Finance / tax 12 12
Other 10 13
IT 12 21

Decrease Increase

* Numbers are percentage of respondents answering that headcount would either increase or decrease.

Comments:
• Retail banking is likely to see an increase in staff numbers over the coming months, in line with bankers’
expectations of increased demand for retail products. Investment banking divisions and head office
functions will be most impacted as banks are forced to reshape business and operating models.


Business priorities and product line expectations


Belgian banks don’t expect consolidation over the next
six months
Do you expect there to be significant consolidation of the banking sector in your country?

100 100
14 13
80 47 80
37
60 60 50
100 4
40 40

49 49 37
20 20

0 0

No Don’t know Yes No
Yes, in the medium to long term
Yes, in the short term (within the next 12 months)


Comments:
• Contrary to Belgium, the European banks are evenly spread. Half of the banks expect consolidation and
the other half doesn’t expect consolidation over the next six months.


Expectations in Europe in relation to likely consolidation
vary considerably by country
Do you expect there to be significant consolidation of the banking sector in your country?
(cont’d)

Belgium 100 Belgium 14 37 49
Europe 47 4 49 Europe 13 50 37
France 48 11 41 France 12 43 45
Germany 34 66 Germany 74 27
Italy 41 8 51 Italy 4 62 34
Nordics 48 52 Nordics 21 46 33
Poland 44 6 50 Poland 6 37 57
Spain 78 22 Spain 31 51 18
Switzerland 96 4 Switzerland 13 50 38
UK 9 5 86 UK 10 42 48
0 20 40 60 80 100 0 20 40 60 80 100
Yes Don’t know No Yes, in the short term Yes, in the medium to long term No


Comments:
• Expectations in Europe vary considerably; Belgium and UK expect (almost) no consolidation (0% and 9%
respectively), while 96% of the Swiss banks expects banking consolidation


Belgian banks focus on cutting costs and risk
management over the next six months
How important are the following activities likely to be for your bank over the next six months?

Belgium Europe
Cutting costs 83 Risk management 65
Risk management 83 Preparing for Basel III 57
Developing/introducing new products 67 Minimising all non-essential expenditure 53
Minimising all non-essential expenditure 50 Cutting costs 52
Preparing for Basel III 50 Streamlining processes 50
Current changes in financial reporting/IFRSs 33 Restructuring business operations 27
New remuneration systems 33 Developing/introducing new products 26
Restructuring business operations 33 Current changes in financial reporting/IFRSs 24
Streamlining processes 33 New remunterations systems 24
Acquiring new assets or businesses 17 Acquiring new assets or businesses 18
Establishing new business segments 17 Disposing of assets or businesses 17
New foreign markets/internationalisation 17 Establishing new business segments 17
Off-shoring 17 New foreign markets/internationalisation 13
Disposing of assets or businesses Off-shoring 13
Reducing the number of products Reducing the number of products 12
0 20 40 60 80 100 0 20 40 60 80 100
Percentages with score 1 to 3

Comments:
• Belgian banks focus more or less on the same activities as the European banks. Biggest difference is the much
bigger focus on developing new products: 67% of the Belgian banks focuses on this activity against 26% of the
European banks


Across Europe, the growth agenda continues to be
overshadowed by a focus on risk, region and cost

How important are the following activities likely to be for you bank over the next six months?

Preparing for Basel III 90 Cutting costs 83 Preparing for Basel III 58
Streamlining processes 80 Risk management 83 Risk management 56
Minimizing all non-essential expenditure 70 Developing / introducing new products 67 Minimizing all non-essential expenditure 44
Risk management 70 Minimizing all non-essential expenditure 50 Cutting costs 41
Current changes in financial reporting / IFRSs 50 Preparing for Basel III 50 Streamlining processes 26
Cutting costs 40 Current changes in financial reporting / IFRSs 33 Developing / introducing new products 23
Developing / introducing new products 20 New remuneration systems 33 New remuneration systems 22
Acquiring new assets or businesses 10 Restructuring business operations 33 New foreign markets / internationalization 20
Restructuring business operations 10 Streamlining processes 33 Off-shoring 20
Disposing of assets or businesses 10 Acquiring new assets or businesses 17 Establishing new business segments 19
Establishing new business segments 10 Establishing new business segments 17 Acquiring new assets or businesses 15
New remuneration systems 10 New foreign markets / internationalization 17 Disposing of assets or businesses 14
Off-shoring 10 Off-shoring 17 Current changes in financial reporting / IFRSs 12
New foreign markets / internationalization Disposing of assets or businesses Reducing the number of products 11
Reducing the number of products Reducing the number of products Restructuring business operations 7

Risk management 72 Risk management 74 Risk management 75
Preparing for Basel III 65 Cutting costs 59 Cutting costs 50
Streamlining processes 64 Minimizing all non-essential expenditure 59 Minimizing all non-essential expenditure 50
Cutting costs 56 Streamlining processes 56 Preparing for Basel III 50
Minimizing all non-essential expenditure 56 Preparing for Basel III 55 Current changes in financial reporting / IFRSs 45
Current changes in financial reporting / IFRSs 21 New remuneration systems 51 Streamlining processes 45
Restructuring business operations 18 Restructuring business operations 47 Restructuring business operations 42
Acquiring new assets or businesses 16 Developing / introducing new products 44 Acquiring new assets or businesses 30
Developing / introducing new products 16 Establishing new business segments 37 New remuneration systems 30
Disposing of assets or businesses 14 New foreign markets / internationalization 34 Developing / introducing new products 22
New remunterations systems 10 Off-shoring 30 Disposing of assets or businesses 21
Reducing the number of products 10 Disposing of assets or businesses 28 Establishing new business segments 20
Establishing new business segments 6 Current changes in financial reporting / IFRSs 26 New foreign markets / internationalization 20
New foreign markets / internationalization 2 Acquiring new assets or businesses 24 Reducing the number of products 16
Off-shoring 2 Reducing the number of products 21 Off-shoring 5

* Percentages with scores 8 to 10.


Across Europe, the growth agenda continues to be
overshadowed by a focus on risk, region and cost

How important are the following activities likely to be for you bank over the next six months?*

Preparing for Basel III 61 Risk management 66 Risk management 77
Streamlining processes 61 Cutting costs 56 Cutting costs 70
Cutting costs 56 Streamlining processes 51 Minimizing all non-essential expenditure 70
Minimizing all non-essential expenditure 44 Preparing for Basel III 50 Preparing for Basel III 46
Risk management 39 Current changes in financial reporting / IFRSs 28 Developing / introducing new products 44
Developing / introducing new products 30 Developing / introducing new products 23 Disposing of assets or businesses 37
Current changes in financial reporting / IFRSs 26 New remuneration systems 22 Restructuring business operations 37
Acquiring new assets or businesses 17 Restructuring business operations 18 New remuneration systems 33
Restructuring business operations 17 Minimizing all non-essential expenditure 11 Current changes in financial reporting / IFRSs 31
Establishing new business segments 17 Acquiring new assets or businesses 6 Establishing new business segments 30
Reducing the number of products 13 Disposing of assets or businesses 6 Off-shoring 23
New remunterations systems 9 Establishing new business segments 6 Acquiring new assets or businesses 22
Off-shoring 9 Off-shoring 6 Reducing the number of products 19
New foreign markets / internationalization 4 Reducing the number of products 6 Streamlining processes 19
Disposing of assets or businesses 0 New foreign markets / internationalization 0 New foreign markets / internationalization 15

Switzerland UK
Minimizing all non-essential expenditure 60 Risk management 59
Preparing for Basel III 60 Cutting costs 55
Streamlining processes 56 Minimizing all non-essential expenditure 55
Risk management 53 Streamlining processes 48
Cutting costs 52 Preparing for Basel III 39
Restructuring business operations 19 Restructuring business operations 39
New foreign markets / internationalization 19 Disposing of assets or businesses 30
Acquiring new assets or businesses 18 Off-shoring 24
New remuneration systems 18 Current changes in financial reporting / IFRSs 19
Developing / introducing new products 11 New remuneration systems 19
Establishing new business segments 11 Acquiring new assets or businesses 15
Disposing of assets or businesses 7 Developing / introducing new products 14
Current changes in financial reporting / IFRSs 4 Reducing the number of products 14
Off-shoring 4 Establishing new business segments 10
Reducing the number of products 4 New foreign markets / internationalization 10

* Percentages with score 8 to 10.


The outlook across all business lines is significantly
weaker going into 1H2013

How do you rate the outlook for your bank over the next six months in each of the following
business lines?*

Corporate banking 5 31 45 16 2 Corporate banking 34 38 11 3

Debt and equity issuance 3 20 40 18 7
Deposit business 39 44 8 3

Other 22 36 11 2
Private wealth management / AM 5 27 36 16 5
Private wealth management / AM 28 41 10 2
Retail banking 9 37 32 12 3
Retail banking 37 44 8 1
Securities services 5 22 41 16 6

Securities trading 4 20 40 22 5
Securities trading 20 34 17 6

Transaction advisory (e.g., M&A) 3 14 43 16 9 Transaction advisory (e.g., M&A) 26 37 9 1

Very good Fairly good Neither good nor poor Fairly poor Very poor Good Fairly good Fairly poor Poor
Comments:
Uncertainty continues to dampen investment banking activity as companies delay major investments and organic expansion.
Reflecting this, banks expect deposits to increase, which will at least help those with funding challenges. Investment banks expect
tougher conditions in the first half of 2013. Securities grew rapidly to become the principal contributor to investment banking
revenues by 2008, but the volatility of returns through the crisis have led a number of banks to shift their focus to steadier
business lines. The outlook for transaction advisory was also poor, as companies would rather consolidate or grow organically
than expand through acquisition.
Autumn 2012 responses are based on a five-point scale and spring 2012 responses are based on a four-point scale.
Please note, chart may not add up to 100% due to respondents selecting ‘Don’t know’ or ‘Not applicable’.


Ernst & Young
Assurance - Tax - Transactions - Advisory

About Ernst & Young

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Young Global Limited, a UK company limited by guarantee, does not
provide services to clients. For more information about our organisation,
please visit www.ey.com.

About Ernst & Young’s Banking & Capital Markets Center

In today’s globally competitive and highly regulated environment, managing
risk effectively while satisfying an array of divergent stakeholders is a key
goal of banks and securities firms. Ernst & Young’s Global Banking &
Capital Markets Center brings together a worldwide team of professionals
to help you achieve your potential – a team with deep technical experience
in providing assurance, tax, transaction and advisory services. The Center
works to anticipate market trends, identify the implications and develop
points of view on relevant sector issues. Ultimately it enables us to help
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