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In our latest report, we look at a number of explanations for European banks’ low profitability in recent years, including low interest rate environment, legacy asset issues, stricter regulation, challenges from digital transformation, and overcapacity in the sector.

Using a dataset of 300 European banks that we constructed, we conducted simulation analysis of how European banks’ profitability could evolve over the next five years.

Our scenarios suggest that pressures resulting from the recent crisis will require banks to be more ingenious in pursuing strategies which cut operating costs and improve their income streams.

Successful banks will largely be among those which can embrace the shift to online while keeping a lean cost structure.

In this report we look in more detail at a number of explanations for European banks’ low profitability in recent years:

  • Low interest rate environment
  • Legacy assets issues
  • Stricter regulation
  • Challenges related to digital transformation and FinTech
  • Overcapacity in the sector