One in eight retail banks will face losses this year as a result of the Covid-19 outbreak, according to Kearney’s European Retail Banking Radar
Analysis from the consultancy has found that revenue for retail banks will fall by an average of 20% over the course of 2020 and that profitability per customer will slide by approximately 60%.
The report, which annually tracks 92 retail banks in 22 European markets, asserts that, while certain consumer areas such as food shopping, streaming services and online retail are thriving, customers have dramatically scaled back their spending.
This is especially the case on the lending side, says Kearney, as loan repayment holidays, extended credit lines and interest-free overdrafts put a squeeze on profits.
The firm says the 20% projection is just a base scenario, based on a partial recovery towards the end of the year, and that it’s possible revenues could drop as much as 35-40%.
Simon Kent, partner and global head of financial services at Kearney, comments: “Repayment holidays on credit cards and loans and offers of interest-free overdrafts are vital for consumers, but they do mean that banks are vulnerable as their income levels drop while operating costs remain largely unchanged.
"Looking ahead, those that will survive will be those that have diversified with more digital services. Customer trust is the real test - banks that actively help their customers combat the crisis will be rewarded with increased loyalty, whilst those who don’t go the extra mile will inevitably suffer the most.”