KPMG: New Chapter in Reformation of the Banking Sector

By Rob Starr, Content Manager, Big4.com
KPMG’s report, Focus on Transparency: Surviving the Storm analyzes the 2011 financial reports of Europe’s 15 largest banks and discusses key industry issues including governance, remuneration and regulation.  The reformation of the banking sector has entered a new chapter as banks must rebuild shattered trust and confidence, redefine culture and behavior, rein in costs and focus on core businesses according to the findings.

Financial analysis in the report shows that combined profits hit 62 billion euros (EUR) at the leading 15 European banks in 2011, against EUR84 billion in 2010. Only five of the largest banks reported an increase in profits over the year, while 10 saw an increase in their cost income ratio, and total incomes shrunk for seven banks. Net revenues of investment banking reduced on average by 13.5 percent due to the difficult economic and market conditions, especially in the second half of 2011, leading to lower margins and reduced trading volumes which impacted revenues as clients pulled back activity in light of the eurozone crisis.

KPMG’s report also highlights the lack of transparency of financial reporting across the banks, particularly with regard to investment banking results and remuneration.