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2023 has been a successful year for European retail banks: After an already good previous year 2022, retail banks grew their topline significantly in 2023. Banks managed to contain operating cost growth in 2023 to a few percentage points – mainly driven by inflationary pressure.
As a function, the positive gap between revenue and cost has increased considerably in 2023, as banks continued to reap the benefits of interest hikes and margin expansion. Going forward, we expect a topline decrease due to interest margin compression, and a continuous cost uplift.
On a global level, the performance trajectory of 2023 has been similar, with differences in the magnitude of effects. While the international sample exhibited a homogenous cost development (+1% in the US and Australia), topline has developed more strongly in the US (+15%) than in Australia (+4%).
KPIs of the European retail banking market in 2023
While 2023 has been another great year for topline development of European banks, the country context matters:
Fees and commission income has stagnated overall, albeit with notable decreases in some markets e.g., Nordics (-12% YoY) and Spain (-7% YoY), partially due to a change of mix towards fixed income/ deposit products.
In the past year, overall ~85% of retail banks improved their topline, with less than 20% progressing on cost. Going forward, we expect a topline decrease due to interest margin compression, and a continuous cost uplift of 3% for 2024.
Dominik Berner, Julia Burger, Ramon Papavlassopoulos, Christian Mesisca, and Carolin Eiting have also contributed to this report.
Partner, Strategy& Germany
Dr. Lisa Schöler
Director, Strategy& Germany
Johannes Gärtner
Director, Strategy& Germany
Partner, Strategy& Netherlands
Hendrik Bremer
Senior Executive Advisor, Strategy& Austria
Financial Services Leader, Istanbul, Strategy& Turkey
Director, Zurich, Strategy& Switzerland