Report: European retail banking profits to slip 40%

17 July 2012

Europe's largest economic powers could see the profitability of their retail banking sectors plummet in the near future, it has been suggested.

A new report published today (17 July) by McKinsey has indicated that the impact of new regulations will lead to Germany, France, Italy and the UK experiencing a combined 40 per cent dip in this area, Reuters reports.

The management consultancy warned that unless banks in these countries implement measures to deal with 39 incoming national and international rules - such as Basel III - sooner rather than later, they will witness a marked fall in the income of their retail operations.

McKinsey estimates that if no action is taken, return on equity for banks will fall from 14 per cent to seven per cent in Britain, while declining to four per cent in Germany, three per cent in Italy and ten per cent in France.

It is thought the regulatory reforms will also have an impact on lenders' revenues and margins.

By Tony Aynsley

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