State of the Banks; Assessing industry trends and key performance metrics of the four largest players in The Netherlands

State of the Banks

State of the Banks; Assessing industry trends and key performance metrics of the four largest players in The Netherlands

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In only a few weeks the world has changed fundamentally and all of us are trying to cope as well as we can with this new reality. In these challenging times, it is wonderful to see the tremendous efforts governments, regulators and businesses to keep people safe and healthy. Business continuity plans are actually working at scale and therefore most businesses are able to operate.

Governments and banks have announced far reaching economic measures to proactively help businesses and consumers to economically weather this storm. Yet, even taking these packages into consideration there remains tremendous uncertainty and markets respond strongly to this, adding to the many challenges our clients are facing.

So only three months into the new year, in the context of today's situation, the 2019 financials seem like a very distant past. 2019 proved to be a challenging year for the four major Dutch banks. The banks' financial results reflect the impact of the low interest environments, with interest margins on all products, including mortgages – which have historically been a primary driver of income for Dutch banks - continuing to be under considerable pressure. A competitive market driven by the strong demand of institutional investors for long-term fixed rates on mortgages combined with the anticipated impact on capital requirements have led to banks consider alternatives such as the Originate-to-Distribute model in order to continue serving customers demand whilst also increasing fee income.

If 2019 proved to be a challenging year for banks' top- and bottom line, 2020 is likely to become even more challenging. The outbreak of COVID-19 has already proven that banks must be extremely flexible in addressing short-term challenges, and will need to plan diligently in order to assess this phenomenon's medium- and longer-term impact on their business. High impact areas include liquidity-, market- and credit risks but also aspects like ERM, non-financial risks and financial reporting will be affected. Banks also need to consider operational- and compliance challenges related to working remotely for a prolonged period. And related to the economic support measures for certain client groups, the consequences of for instance accommodating payment holidays on SME loans and residential mortgages on the capital position need to be carefully considered.

Longer term concerns are obviously related to the wider economic impact of the crisis. Most economic commentators are pointing at the very real risk of a recession. How deep and how long it will take before we can see an economic recovery all depends on how successful we can be in containing COVID-19. Fortunately, Dutch banks are financially resilient and willing and able to proactively help their clients to face the challenges that lie ahead.

This publication discusses the state of the four largest banks in the Netherlands and our approach on rebuilding customer trust. Last year proved to be challenging for the bank's, and in this time of COVID-19, this year is likely to become even more challenging.

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Please contact Jelle Dijkers for any queries .

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