An environment where maturity transformation does not provide sustainable profits is an important challenge for banks. However, banks do have multiple levers to adapt and defend profitability and growth. Of those, both pricing and balance-sheet management are still underutilized levers that can deliver quick benefits while enabling banks to make better strategic decisions.
Read this interesting ‘Point of View’ from Efma and their partner The Boston Consulting Group. The two authors are Axel Reinaud, Senior Partner and Managing Director at The Boston Consulting Group end Vincent Bastid, CEO at Efma.
The ‘new normal’ environment of durably low interest rates is challenging the model of banking intermediation.
While effects have not yet fully played out, the flattening of the yield curve puts banks’ profitability under pressure.
To mitigate the impact, banks need to develop a strategic response including measures such as review of their business portfolio,
development of asset distribution, cost reduction… In this paper, we focus on two important levers of adaptation: banks need to
adapt their pricing schemes, looking at the entire balance-sheet, as well as enhance their ROE forecasting capabilities at product level.