RETAIL BANKING | Staff Reporter, Europe

Weekly Global News Wrap: European banks will recover to pre-COVID levels after 2022; HSBC mulls US retail banking exit

And Deutsche Bank to slash jobs in Frankfurt and Bonn hubs.


European banks will not see profits return to pre-pandemic levels before 2022, the European Central Bank has warned in its latest financial stability review.

Market expectations point to an overall return on equity (ROE) of 1.7% this year, followed by 3.1% and 5% in 2021 and 2022, respectively. The ROE of euro area banks stood at around 6% in June of 2019, according to ECB data.

However, “with the recent resurgence in infections and new containment measures, it is likely that profitability forecasts will be revised downwards, as it is also uncertain when a vaccine will be available for a larger share of the population,” the central bank said.

From Reuters

HSBC is considering a complete exit from US retail banking after narrowing the options for how to improve performance at its struggling North America business, according to a Financial Times report.

The bank said last month it planned to reduce annual costs to below $31b by 2022, a more ambitious target than it set out in February and well below the operating expenses of $42.3b it reported in 2019.

The bank also said it would also accelerate the transformation of its US business, where it has long struggled to compete with much bigger players.

From Reuters

Deutsche Bank is planning to cut one in three jobs at its retail banking hubs in Frankfurt and Bonn as part of its efforts to reduce costs and restore profitability.

“We will only make our private customer business in Germany profitable and sustainable if we continue to reduce costs significantly. To achieve this, we will have to take further measures," according to the letter signed by Deutsche Bank board member Karl von Rohr.

The 350 redundancies affecting mainly the Postbank retail banking arm will be made by the end of 2022 and will be carried out in the most socially acceptable way possible, the letter said.

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