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2022 a record-breaking year for European retail banks

2022 a record-breaking year for European retail banks

Kearney has released the fifteenth edition of its annual European Retail Banking Radar, which tracks the performance of 89 retail banks across 21 European markets.

In the face of uncertain macroeconomic conditions and continued inflationary pressures, the research has found managing costs, investing in digitisation and maintaining customer trust critical to maintaining performance in 2023.

The latest report shows that 2022 was a record-breaking year for European banks, with rising interest rates providing a tailwind that has boosted income across the board.

At €650, income per customer was at its highest level since 2015. Amongst the larger economies, the UK shows the strongest growth of 16.5% compared to 3.8% in France, 3.5% in Germany and 4.6% in Italy.

Eastern Europe overall also showed strong growth of circa 18.7%.

Productivity over the last 15 years has also dramatically increased, with productivity per employee in 2022 almost double (197%) what it was in 2008, and productivity per branch almost triple (284%).

“It is positive to see such a strong performance from the European retail banking sector in 2022. While many indicators point towards continued growth of income and profitability, the recent failures of SVB and Credit Suisse have demonstrated the risks present in  a very complex macro-economic environment,” comments Sameer Pethe, Partner at Kearney.

“Moving forward, it will be particularly important for banks to build and maintain customer trust and confidence. Once a run starts, it can turn into a self-fulfilling prophecy and this is something that banks must avoid.

But banks need to do more to attract and retain customers, too, they need to deliver easy, simple, and personalised interactions that are relevant to the financial lives of customers.”

Cost management remains critical

Improvements in technology and digitisation have clearly supported this jump in productivity and have allowed for a lower physical footprint and reduced headcount. Overall headcount at European banks has reduced by 16% between 2008 and 2022, and the number of branches has reduced by 42%.

However, this has not translated into a lower overall cost base, which increased by 2.3% to €188 billion last year.

Fortunately, this increase was significantly lower than income growth, meaning that the Cost Income Ratio for European banks was 58.8% – its lowest level in the past 15 years.

Banks must continue to work on containing and reducing costs if they are to build on the success of 2022. This task will become challenging in an environment with significantly higher inflation than at any point in the past 10 years.

“It is clear that in recent years, new technology and digitisation have been key factors in improving the performance of the retail banking sector,” continues Roberto Freddi, Partner at Kearney.

“These banks now have a real opportunity to further capitalise on the benefits of technology by increasing strategic investments in digital transformation. Improving business resilience will also be important as banks prepare to navigate the challenges ahead.”

European findings: 

  • Income growth (7%) significantly outpaced the business volume of growth (4%) for the first time in the history of the Retail Banking Radar
  • Overall risk provisions as a percentage of income increased slightly from 5% in 2021 to 6.5% in 2022
  • Total profit in 2022 increased 11.9% YoY
  • Overall client deposits increased 3.7% YoY
  • Income per employee increased 10.2% in 2022 YoY

UK-specific findings: 

  • In 2022, the total profit of the UK banks covered by the radar increased 8.1% compared to 2021
  • Client loans increased by 4.1% in 2022 compared to 2021
  • Employee headcount in UK retail banks down 3.4% in 2022 compared to 2021


The post 2022 a record-breaking year for European retail banks appeared first on Payments Cards & Mobile.

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