CORPORATE BANKING STRATEGY& OFFERING IN THE LIGHT OF COVID-19 - APRIL, 2020 - PWC STRATEGY
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Corporate Banking Strategy& offering in the light of COVID-19 April, 2020
Strategy& perspective on the corporate banking market
▪ Stable Corporate Banking market with EUR 21.4
bn total market size/ revenue pool in 2019
Key questions and challenges
▪ Increasingly saturated corporate banking market
with little growth (Pre-crisis growth estimate already
Pre-COVID-19 at 0.1%)
Situation ▪ How can you appropriately baseline the
▪ Cross-sell ratios are increasingly under pressure immediate P&L impact to derive a short-term
▪ High dependency on lending margin among action plan?
majority of players ▪ Is your existing business model robust
enough?
▪ Pre-crisis pain points are being fortified in particular: ▪ How should your portfolio shift in terms of
Declining profit margins, ongoing regulatory constraints, sustainability, clients, industries?
increasing competitive pressure ▪ How do your digital efforts need to be
▪ In addition, new challenges come into play…. recalibrated to support overarching goals?
− Clients - Differentiation in core/ non-core clients and ▪ Is your current product offering supporting the
appropriate re-segmentation will be more vital (in future?
COVID-19 core vs. non-core industries) ▪ Which strategic pathways open up to you in
Complications − People - Transition of front office units will be further light of the crisis?
fuelled ▪ Where do you see your funding basis going
− Risk - Significant constraints in accessing capital forward?
markets, thus funding will become a relevant ▪ How do you support your human capital in this
concern, risk impact on portfolio will increase transition?
− Liquidity - Abundance becomes a shortage:
Liquidity will be a limited resource
Strategy& 2German corporate banking market declines by ~2.1% due to
COVID-19 in 2020
German corporate banking market (EUR bn.) COVID-19 Impact
Credits Corporate Finance ▪ Economic impact of COVID-19 (expected GDP growth of -
7.2% in Germany) causes the German corporate banking
Cash Management incl. Deposits Financial Markets
market to decline by approx. EUR 500 m. in 2020 compared
Trade Finance % CAGR to a scenario without COVID-19
▪ The decline is primarily driven by:
COVID-19 Impact
− Cash Management: decreasing domestic and cross-
-2.1% boarder transactions (number and volumes) due to the
22.1 lockdown
21.7 21.3 21.3 21.4 20.9 20.9 20.8
0.8
1.2 1.7
0.7
0.6 0.6 0.6 0.6 0.5 0.5
− Credits: shift to shorter maturities (avg. of 3.9 years
1.9 1.4 1.4 1.3 1.3 1.3
1.1 1.1
1.1 1.1 1.1 1.0 1.0 1.0 vs. 4.2 years pre-COVID-19) due to banks refusing to
4.9 4.9 4.7 4.9
prolongate long-term financing; furthermore, continued
4.8 4.6 4.5 4.5
margin squeeze due to risk-driven increase of banks‘
refinancing costs
− Trade Finance: global lockdowns and hampered
13.8 13.7 12.9 13.6 13.6 13.5 13.5 13.4 international trade decrease the demand, esp. for Export
Finance
▪ Looking at 2022, we expect a slight recovery of the German
economy (+0.2% in 2021; +1.1% in 2022) – however, we
2016 2017 2018 2019 2020e 2020e 2021e 2022e
excl. incl. incl. incl.
assume the margin squeeze across products to continue
COVID-19 COVID-19 COVID-19 COVID-19 the general long-term trend prior to COVID-19
Strategy&COVID-19 impact hits specific product groups – however, split
by segments essentially unchanged
Segments Total Product groups
By turnover [EUR bn.] Long-term Credits S/T C U D Cash Mgmt TF FM CF
MNC 4.0
(19%) 27% 14% 3% 4% 16% 8% 8% 19%
(>1000M)
Large Corp 2.2 31% 17% 4% 4% 15% 7% 7% 16%
(250-1000M) (11%)
Mid-Size to Large Corp 2.8 40% 22% 5% 3% 16% 7% 2% 5%
(50-250M) (14%)
Small to Mid-Size Corp 4.5 43% 23% 5% 8% 15% 4% 1%
(5-50M) (22%)
Small Businesses 7.3 45% 24% 6% 5% 18% 1%
(Overview of main action points in light of market
developments
C-Level agenda
Overall strategy
Markets & macro-economic dev. Digitization Sustainability Profit increase/ growth Cost reduction M&A
Client focus and growth
Client & Coverage Product & production Risk
Client strategy Segment strategy Prodct strategy Credit risk Market risk
• Market attractiveness/ customer • SME • Financing (Lending, Syndicated • TxB (Cash Mgmt, IZV/ AZV, Trade • Credit Approval (plain/ structured) • Value at Risk
potential Loans, …) Fin, SC Fin) • Monitoring/ Workout/ Special Loan • Counterparty Risk
• Small cap
• Sales planning • Treasury & risk mgmt. products • CF (ECM, DCM, M&A) Mgmt
• Mid Cap (Plain IR/ FX, structured, …)
• Go-to-Market • Markets (Equities, Commodities, FI, • Portfolio Mgmt
• Large Cap FX, …)
• Support model • MNCs
• Regional footprint • Fin. Institutions Ops Delivery Model IT Operating Model Liqui risk Op risk
• Distribution channels • Public Org • Lending & Credit-Ops IT • Credit Op (iColl. Mgmt) • Calculation • Fraud processes, IT
• Sales dimensioning and • Special Client Groups • TxB IT, IB/ Markets IT • Financial Market Ops • Process • 3rd party
organization (HF, PE, RE, …) • Risk & Finance IT • TxB Ops
E2E processes
Sales / client processes Back-office processes
Sales and product management Production steering Risk/ capital & funding
• Client profitability/ EVA • Product profitability • Process KPI control • IT RtB & RtB steering • Risk & Capital optimiztion (Eco/ • Rating & funding optimization
• SoW/ activity planning & control • Cross-/ up-selling, etc. • Process costs • IT costs (RtB/ CtB) Reg) • Balance sheet
• Regulatory
Organization & HR
Organization (actual/target structure, dimensioning, decision-making processes, etc.) People (Leadership, Change Mgmt, Corp Culture, Employee Brand, etc.)
Strategy& Immediate need for action Mid-term need for action 5Winning through the crisis requires achievements in key areas
early on
Strategy Clients & portfolio Liquidity
Macro-economic scenarios assessed and applied to Full transparency on current liquidity position
Client base segmented in core vs. non-core
different business segments established (cash and collateral)
Consistent strategy and loyalty communication to
Scenario-based action plan developed Overview of funding mix generated
clients conducted together with related measures
No-regret moves regarding efficiency identified and Industry-based scenarios calculated and reflected in
New funding sources identified
kicked-off business strategy
Strategic CIR analysis conducted and long-term levers Consistent strategy and communication towards
Sustainability established as key segmentation criteria
scoped institutional investors conducted
ESG plan made consistent with business model … …
HR & organization Bank steering & regulatory Risk
Immediate operational measures up and running incl.
Task force results bank-internally accepted Portfolio screening rigorously conducted
fully functioning remote workspaces
Initial hypothesis on future workforce and operating Capital ratio robust in terms of scenarios and RWA Joint understanding on key parameters created and
model developed expectations aligned aligned between client and risk
Clear communication plan in terms of transparency Monitoring/ work-out/ restructuring capabilities and
Central approach to be regulatory compliant installed
and frequency established capacities available at hand
HC continuity plan created considering contract terms, Sufficient alignment between bank steering and
…
compliance with labor law, fix vs. contractual staff business established
… …
Strategy& 6Your Strategy& contacts
Dr. Philipp Wackerbeck Robert Bischof Andreas Becker Felix Becht Stephan Plietsch
Partner, Head of Financial Partner Senior Executive Director Senior Associate
Services Europe Advisor
+49 170 2238 659 +49 175 560 1990 +49 170 7650 376 +49 170 2238 409 +49 170 641 6744
philipp.wackerbeck@ robert.bischof@ andreas.b.becker@ felix.becht@ stephan.plietsch@
strategyand.de.pwc.com strategyand.de.pwc.com strategyand.de.pwc.com strategyand.de.pwc.com strategyand.de.pwc.com
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