The consultancy's 2012 Retail Banking Radar - which surveys 42 major retail banks and retail banking divisions of universal banks across 15 European markets each year - finds that the sector is returning to normal levels of income, cost and profitability from the nadir of 2009.

However, while revenues are almost back to pre-crisis levels, profits still lag 15% below 2007, while banks in Italy, Portugal, Spain and the UK have presided over a period of shrinking income.

The overall stability in cost income ratios over the timeframe indicates that banks have managed their cost base well in line with income. It also implies, however, that banks have shied away from a more fundamental redesign of both their business and operating mode, suggests A T Kearney.

The consultancy has identified six key areas crucial for European retail banks to progress and ensure performance recovery, from making efforts to achieve operational excellence, to complexity management (partly through reducing the legacy IT burden), re-pricing of products and service innovation.

However, the next big step in sales efficiency will only be possible if the branch is assigned a new role, says A T Kearney partner Andreas Pratz, as one channel amongst many in a model suited to cater for the needs of the digital natives.

"Whilst cost and risk management will remain high on the agenda, it is time to seek a step change in delivering to customers," he says. "This entails using new technology in a broader way than before, providing more services and advice outside the branch channel. It also leads the way into a new branch model not with less, but more streamlined branches."