Summary of How Pricing Can Solve European Banking’s Earnings Crisis

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How Pricing Can Solve European Banking’s Earnings Crisis summary
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Rating 

8 Overall

9 Applicability

7 Innovation

7 Style

Recommendation

Because their costs exceed their revenues, European banks have seen negative returns since 2012. While they focus on restructuring to meet increasingly stringent regulatory requirements, these institutions have not revised their pricing to sustain profitability. According to professionals at the Boston Consulting Group, dynamic and data-driven pricing models present an opportunity to bolster the bottom line and mitigate the adverse effects of regulation. getAbstract suggests this astute technical analysis to financial executives for its diagnostic insights.

In this summary, you will learn

  • Why European banks have experienced disappointing financial results, and
  • Why market research and the use of client data can lead to product and services pricing that supports consistent profitability.
 

About the Authors

Carsten Baumgärtner et al. are professionals with the Boston Consulting Group.

 

Summary

European banks’ average cost of equity in 2016 was 12.8% against an average return of 4.1%, marking the fourth year in a row of losses. Their sorry state contrasts markedly with that of their North American counterparts, which have seen their expenses decline over the 2012–2016 period. Persistently high costs and weak revenue in the euro area have compressed margins.  

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