The Banker Awards 2012 – Western Europe

Western Europe

Nordea

Christian Clausen, group chief executive, Nordea

The Scandinavian countries were once the neglected periphery of European banking. But ‘periphery’ has come to mean something quite different in recent years, and instead the Nordic banks are now viewed as beacons lighting the way to a sustainable model for post-crisis European banking. Nordea exemplifies this achievement. The bank’s return on equity has not dropped below 8% for a single quarter since the crisis began, exceeding 10% on an annual basis each year, even with a capital adequacy ratio of about 12% – a performance matched by very few banks anywhere in the developed world.

For Christian Clausen, group chief executive of Nordea, the roots of his bank’s success go back to its origins as a merger of banks hit by Scandinavia’s own credit crisis in the 1990s. To make the integration work, Nordea focused on relationship banking, building the bank around its core customers without straying into non-core activities.

“We were strong going into the crisis, maintained our profits and managed our risks. Therefore we were in a position to build capital so that we had the resources to be there for our customers. Plenty of customers needed some extra liquidity during the crisis, and they remember which banks stood up for them when they needed it most. Even the very largest customers found that they ran out of support from other banks at the worst possible time,” says Mr Clausen.

His recipe for the future is to stay nimble and to stay close to the customer. Since so many banks are being pushed by regulators and investors to operate with stronger capital and funding, many products will need repricing, but there is no way of knowing when that will happen. Consequently, the product lines and customer segments that offer the best opportunities can change quickly.

“There is no specific area that we can consistently view as the best opportunity. For every customer and every transaction we must be diligent and disciplined on getting the right return on capital. That means having a dialogue with customers on pricing and on structuring capital-light solutions, which is what makes the relationship banking model so important,” says Mr Clausen.

The new environment also requires tight cost control, and Nordea has carried out 10% staff cuts while switching the weight of banking services from branches to online. But this is complemented by a more advisory relationship with customers, including providing retail customers with the kind of financial planning discussions more commonly associated with business banking.

Andorra

Andbanc

Jordi Comas, the chief executive of Andbanc, describes 2011 as a “particularly unfavourable year from an economic and financial perspective”. In private banking, Andbanc’s speciality, profit margins were pressurised as clients are unwilling to invest actively in the uncertain conditions.

“The current climate convinces us that in order to be more competitive, we must become more global,” says Mr Comas.
This led to the bank buying the Monaco subsidiary of Italy’s Monte de Paschi, purchasing a 51% stake in Brazil’s largest independent financial management group, LLA Investimento, and entering the neighbouring Spanish market through an agreement with the Medical Association of Barcelona to run its investment management agency. While the Spanish economy may be suffering, the attraction of Andbanc’s strong balance sheet for risk-averse high-net-worth individuals is clear.
The results have been impressive, with Andbanc profits up almost 33%, giving the bank an increased return-on-equity of 12.6%. This is especially notable given a capital-to-assets ratio of more than 10%.

“We achieved historical growth both in assets under management and profitability in an environment where the industry is having trouble maintaining its performances,” says Mr Comas.

Product development has included expanding the bank’s range of financing services to its private clients and offering multi-custody to clients to diversify their deposit counterparty risk. The bank has also launched a small business lending scheme called ‘Andbanc Emprenedors’.

“We aim to consolidate our international expansion, to increase profitability and to continue capitalising on the opportunities that the present economic situation has to offer. We will reinforce our commitment towards capturing the best talent in the sector with one sole aim: to offer the best service in private banking,” says Mr Comas.

Austria

Raiffeisen Bank International

While Raiffeisen Bank International (RBI) acts as a universal bank in central and eastern Europe, in its home market of Austria it focuses solely on large corporate customers. As such, it was the country’s leading force in corporate bonds in 2011 with nine transactions worth a total of E3bn under its belt. The pipeline continued into 2012 with deals done for key corporate names such as Telekom Austria, Scholz and HeidelbergCement.

RBI also works to support Austrian companies’ export drives such as the E33m financing done by the bank’s Beijing branch as part of the funds needed for the construction of a paper plant by Andritz in south-eastern China. Austria’s export finance agency, Oesterreichische Kontrollbank, was involved in the deal and RBI maintains close relations with such agencies and correspondent banks throughout the world.

Karl Sevelda, deputy CEO of Raiffeisen Bank International in charge of corporate banking, says: “We succeeded in becoming Austria’s number one arranger of corporate bonds and other capital market products, thereby offering our customers additional alternative financing sources. And we increased the profitability in our corporate customer segment.”

As far as financial challenges go, Mr Sevelda says that meeting the requirements regarding the core Tier 1 ratio imposed by the European Banking Authority at short notice was one of the toughest. This is now above 10%, with a cost-to-income ratio of about 58% and non-performing loans of 9.8%, reflecting the fallout from the crisis in eastern Europe. Nevertheless, RBI posted the highest profit before tax among all Austrian banks.

Looking ahead, Mr Sevelda says: “We will continue to emphasise our proven and sustainable relationship banking approach and thereby expand our product range per customer. We also plan to further enhance our position as arranger of capital markets transactions with our Austrian and international corporate customers.”

Belgium

BNP Paribas Fortis

In tough economic times, ‘good’ is a relative word, but BNP Paribas Fortis can indeed look back on a good year that included an impressive performance from its retail banking arm and a resilient corporate and investment banking division.

As with most financial institutions, it was not immune to the economic slowdown and the eurozone crisis and these deteriorating market conditions did lead to a 94.5% slump in net profits to €104m. This was partly the result of the negative impairments on Greek sovereign debt in 2011, but mostly due to a reorganisation and discontinuation of some business operations. This was a strategic approach to de-risk its balance sheet, which was mainly driven by the merger of its two operations in Turkey, Turk Ekonomi Bankasi and Fortis Bank, and the acquisition of Fortis Commercial Finance (FCF). The bank merged FCF with its own factoring network, extending its client reach for factoring services to 14 countries.

In Belgium, the bank deployed a successful credit policy in its retail and private banking unit, growing lending to small and medium-sized enterprises and self-employed clients steadily and launching individualised savings and investment products.

BNP Paribas Fortis continued its integration plans, hiring 1200 new employees in its European competence and service centres, which are divided into corporate and transaction banking for Europe, global trade services, global cash management and factoring.

Multi-channel banking, including mobile services and a branch rebrand, and new factoring services and a cash management division with stronger links to corporate and investment banking in Brussels, were the key features of its integration project.

Max Jadot, chairman of BNP Paribas Fortis’s executive board, and the bank’s CEO, says that an increased focus on efficiency will make the bank more agile and customer-oriented in 2013.

Denmark

Nordea Bank Denmark

Although not in the eurozone, the Danish economy has suffered from a reversal in property prices. Moreover, sentiment towards its banking sector was further damaged by the collapse of a second-tier bank and the haircut of its creditors in 2011. Despite this adverse context, Nordea Bank Denmark has proved resilient, staying in profit and strengthening its capital base, while increasing lending 5% in a contracting market. Nordea’s country senior executive for Denmark, Michael Rasmussen, says the bank’s relationship banking model has proven even more essential than usual in these conditions.

“Customer behaviour is changing very fast. We now have to build strong relationships with our customers on many different platforms, in the branches but also via the internet and mobile. To transform our operation and the way we work to match those changes has been challenging – but also very rewarding,” says Mr Rasmussen.

Alternative channels have taken off, especially on the retail side, with the number of remote log-ins per month increasing 15 times over during the year to June 2012. But the bank has not neglected the importance of the human touch, overhauling branch designs to provide better services for corporate clients in particular. All retail and small and medium-sized enterprise (SME) clients have access to the same structures for face-to-face advice.

“We have, during the past years, strengthened the relationship with our existing customers significantly. During the first 10 months of 2012 we have conducted close to 440,000 meetings with Danish household customers and more than 35,000 meetings with Danish SMEs. In addition, we have attracted almost 25,000 new relationship customers,” says Mr Rasmussen.

Unsurprisingly, he says the bank aims for more of the same in 2013, while always looking for ways to simplify its products and services to make customers’ banking business as straightforward as possible.

Finland

Nordea

An increase in profits of almost 30% and a return on equity of 9.6%, even with a capital adequacy ratio as high as 15%, are all partly testament to the benefits of operating in one of the eurozone’s few healthy economies. Even so, they also reflect Nordea’s skill at finding new opportunities in a relatively mature market.

In particular, the bank has focused on mortgages (with 46,000 new housing loans issued in the first half of 2012), and acquiring mass affluent customers. Advisory services for households with surplus savings confronted with volatile interest rates have helped attract 12,000 new premium clients to the bank in the first half of 2012.

“We have preserved our ability to support our customers’ financing needs by delivering strong results, despite the challenging market conditions. The number of externally acquired Gold and private banking customers has increased every quarter, we are the largest provider of corporate bonds, and we have carried out our relationship banking strategy successfully,” says Ari Kaperi, country senior executive for Nordea in Finland.

The bank is highly focused on both capital and operating efficiency. The rationalisation of the branch network has been offset by other services, including a debit card cashback deal with large Finnish retailer Tokmanni. On the capital side, the bank held 360,000 meetings with corporate clients, often focusing on how capital-efficient credit structures could avoid Nordea having to pass on the cost of new regulation to its clients. As a result, the bank was able to expand its corporate lending by 6% despite the tougher regulatory conditions.

“We run numerous projects to ensure that we stay in the forefront in the challenging transformation of the global banking industry. We believe that with this further development of our prudent banking model and by always putting the customer at the centre of everything we do, we will safeguard our strong position,” says Mr Kaperi.

France

BNP Paribas

The eurozone crisis bit deep in the second half of 2011, but BNP Paribas has proved to be one of the best-position banks in the region, moving quickly to lower the capital intensity of its business and meet Basel III requirements well ahead of schedule. Even accounting for the impact of the Greek sovereign haircut in 2011, BNP recorded net profits of more than E6bn and paid a dividend to shareholders. It had already matched those earnings in just the first three quarters of 2012, on track for a 15% rise in profits this year.

“BNP Paribas proved its ability to adapt, achieving a Basel III fully loaded common equity Tier 1 ratio of 9.5%, while maintaining our commitment to serve customers, finance the real economy and deliver returns to shareholders,” says chief executive Jean-Laurent Bonnafé.

In France, the bank’s Net Agence online banking platform continues to break new ground, with mobile banking users up more than 70% year on year in the first quarter of 2012. A joint venture with mobile operator Orange allowed the creation of BNP Paribas Mobile in December 2011, which provides a package of applications including contactless payments.

The bank’s new engagement with small and medium-sized enterprises (SMEs), announced in May 2012, involves making an additional E5bn in lending available to this segment in France. The network of small business centres was increased by about 20% in the first half of 2012, and the bank also launched a new concept of SME innovation hubs, with two opened in the first half of 2012 and another eight planned for the rest of the year.

“At a commercial level, the ‘One Bank for Corporates’ concept helped clients expand in Europe and beyond. We successfully developed new solutions worldwide with our new originate-to-distribute model. In our domestic markets, we will focus on innovation and cross-selling while maintaining strong control of costs and risks,” says Mr Bonnafé.

Germany

Deutsche Bank

While the accession of a new executive team provided Deutsche Bank with the opportunity for a strategic review, the bank is committed to the universal banking model, and its performance appears to justify this.

Profits rebounded more than 85% in 2011, taking return on equity to more than 10%, while the acquisitions of Deutsche Postbank, private bank Sal Oppenheim and ABN Amro’s Dutch retail banking activities give the bank a more balanced feel. Deutsche is targeting what it calls the “classic banking” activities to generate 40% of revenues in 2013, with the rest coming from its reshuffled corporate banking and securities (CB&S) division.

“It is not easy to think of another industry that has been hit by comparable regulatory pressure and public scepticism in the middle of a one in a century type crisis of its core markets,” Armin von Falkenhayn, co-head of Germany CB&S. “Cautious investor sentiment affected us almost everywhere and only over the course of the year, based on the tremendous effort of the central banks, did market activity levels improve. But the underlying concern of an environment with a totally different level of tail-end risk has not and will not disappear any time soon. While our roots in the strongest economy in Europe were obviously a major competitive advantage, and we were able to participate in the underlying growth of our clients, we had to adjust our capabilities to the new environment.”

Deutsche was a lead manager for the Talanx launch that reopened the European initial public offering market in October 2012, and Mr Falkenhayn believes that improving sentiment in Germany and across Europe will result in increased opportunities for large-scale cross-border merger and acquisition advisory and deal-related issuances. He says the bank will also aim to further increase efficiency through targeted investments in its platform, and reduced complexity.

Italy

Intesa Sanpaolo

Praising European banks that have made improvements in their markets is important and difficult in equal measure. Important because it is necessary to recognise efforts of lenders operating in an extremely tough environment; difficult because these improvements do not always lead to profits.

The award for the best bank in Italy goes to Intesa Sanpaolo for its promptness in tapping capital markets and strengthening its capital position, its efforts in streamlining business processes, the reducing of its administrative costs, the growth of its support to small businesses, which came about through the simplifying of procedures for granting credit, particularly for microentrepreneurs and small companies. Improvements have also been made with regards to the level of documentation required to apply for a loan and the electronic credit application, which have reduced disbursement time by more than 50%.

On the capital front, Intesa Sanpaolo moved faster than its domestic competitors to raise funds. The effective use of the European Central Bank’s long-term refinancing operation helped the bank’s funding position and generated capital gains.

The bank also showed a focused management of non-performing loans, which helped in reducing provisions. Such measures and business initiatives mean that optimism is high over the lender’s financial results for 2012.

“During the ongoing recession, in a very challenging environment for the banking industry, the group has further strengthened its balance sheet,” says Intesa Sanpaolo chief executive Enrico Cucchiani.

“Intesa Sanpaolo is one of the few banks worldwide to have already reached levels significantly above future Basel III requirements, both in terms of capital and liquidity. The important results achieved in the first nine months of the year put us in a position to confirm the distribution of a dividend for 2012 at least equal to that of 2011. In addition, loans were stable and deposits grew by 4.6%.”

Luxembourg

BGL BNP Paribas Luxembourg

The global economic turmoil may have affected BGL BNP Paribas Luxembourg much like any other bank, but this did not deter it from continuing to invest in its business.

Its financial results for 2011 show that BGL BNP Paribas Luxembourg had its fair share of challenges. Tier 1 capital decreased by 0.7% on 2010, while assets slumped by 17% and net profits declined by 2.5%. Return on equity grew from 5.3% to 6.2%.

But Eric Martin, CEO of BGL BNP Paribas Luxembourg, says: “The main challenges were to maintain our strong leadership in Luxembourg, to stand by our clients as their best banking partner and to keep on investing while preserving an efficient cost control in a dull economic environment.”

Over the past 12 months, BGL BNP Paribas Luxembourg successfully finalised the acquisition of the local leasing activities from BNP Paribas thanks to its solvency ratio of 30.7%. It also merged with the insurance companies Fortis Luxembourg Vie and Cardif Luxembourg International, and started offering factoring services to companies that can sell their unpaid invoices against cash for a discount of the total price, after its acquisition of BGL BNP Paribas Factor in Luxembourg.

In addition to this, the bank refurbished the former BNP Paribas Luxembourg headquarters and turned it into ‘the Villa’, its flagship branch for private banking customers, and opened six new private banking centres. The bank also introduced a lecture series, which it uses to educate and support clients on wealth management matters.  

In terms of innovation, the bank invested in a mobile payments solutions company called Flashiz and improved its branch banking offering with the introduction of Agence Europe, a concept store where customers can, among other things, get coffee from an in-house coffee bar.

“Our strategy is to remain innovative and client-focused while maintaining our strong balance sheet to accompany our clients with their projects,” says Mr Martin.

Malta

HSBC Malta

The eurozone crisis, ongoing market volatility, a persistently low interest rate environment, heightened competition and an increasing level of regulatory change are some of the challenges HSBC Malta has had to overcome while executing a transformation programme with a view to building long-term sustainability. In the year to the end of 2011, its Tier 1 capital rose by 10.3%, while its total asset base increased by 3.1% and net profits rose by 6.3%.

HSBC Malta’s return on equity was slightly lower than the previous year, but still registered an impressive 24.1%. Its cost-to-income ratio rose by seven basis points to 50.4% on the previous year and its non-performing loans increased by 105 basis points to 5.1%. In its latest figures, HSBC Malta notched up a return on equity of 27.5%. The 2011 financials were in accordance with the bank’s investment in its branch network, systems and processes as well as its employees.

In the past year, HSBC Malta implemented a new core banking system, enabling it to standardise its internal systems, processes and products to respond to changing customer demand. It also continued its branch upgrade, worth €11m, which includes next-generation ATMs and a new look and feel of branch outlets.

In line with the wider group strategy of divesting of businesses that are non-core, HSBC Malta sold its card acquiring business and reinvested the €11m it received in the business, while focusing on growing its multichannel reach. It has also invested in relationship managers, specifically to provide small and medium-sized enterprise support.

“Looking ahead, we will continue to focus on our strategy of being Malta’s leading international bank by leveraging HSBC Group’s global footprint and international expertise,” says Mark Watkinson, CEO of HSBC Bank Malta.

He adds that HSBC Bank Malta remains committed to playing an active part in the development of the Maltese economy.

Netherlands

ING Bank

With banks required to hold more capital and comply with tougher regulations generally, there is a renewed emphasis is on improving efficiency. ING is typical in looking at every aspect of the balance sheet from funding to liquidity to margins, as well as at overall costs and potential gains from new technology.

The target was a 10% to 13% return on equity, and the bank managed 11.6% in 2011 with a slight drop to 10.45% in the first three months of this year. Risk appetite has been redefined and the bank has reduced its exposure to southern Europe.

Only by managing its balance sheet more effectively can ING grow its loan book under the new constraints. Core Tier 1 strengthened to 10.9% in the first quarter of 2012, while the cost-to-income ratio was 59.5%, with a target range of 50% to 53% by 2015.

On the customer service front, mobile banking is a priority and has been introduced into all retail units. Social media is used as a way of reaching customers, with the bank’s French operation using a blog to collect feedback on products, while its Canadian arm has developed the ‘THRiVe’ transactional account with direct customer input.

In the commercial banking and wholesale space, ING was the lead arranger of corporate loans in the Netherlands and performed well in international league tables. The bank has improved its processes and streamlined workflows to speed up credit approvals for small and medium-sized enterprises. For Dutch customers the bank has rolled out its ‘conditietest’, analysing businesses to help them achieve their goals. Along with the Dutch government, ING began a joint initiative to provide loans of up to E50,000 to small businesses unable to access regular bank financing. The programme, called Qredits, also includes coaching.  

As well as being a household name in the Netherlands, ING has 68,000 employees serving 37 million clients in 40 countries.

Norway

DNB

In spite of the tough market conditions and the need to prepare for new regulations, DNB was engaged in a number of key initiatives during 2011. Foremost among these was the rebranding under one name – DNB – in November 2011 of DnB NOR, Vital, Postbanken and DnB Nord. The aim was to make the bank a stronger and more integrated institution, and the consolidation allows former DnB NOR customers to have access to banking services at post offices and former Postbanken customers to use all the bank branches and obtain a wider range of products. From the bank’s perspective, operations are streamlined and costs are lower.

New products and services have tended to emphasise the needs of young adult customers. Among these services are BLU, a programme of home loans for the under-34s, and BSU, a home savings scheme.

Retail banking showed a steady upward trend, with mortgages and deposits both increasing. With small and medium-sized enterprises, the focus has been on providing competitively priced loans at a time when credit is scarce, and in a corporate reputation ranking, customer satisfaction among large companies has been strengthened. DNB was ranked as the best financial institution in a survey of Norway’s 200 largest companies.

On the financial front, DNB clocked up a return on equity of 11.4%, with profits of NKr12.98bn ($2.25bn) in 2011, a cost-to-income ratio of 47.1%, and a non-performing loan ratio of 1.5%.

The bank has placed a high priority on becoming more efficient by way of a cost-reduction programme that involves better coordination and streamlining of processes within procurement, IT and other support functions. DNB aims to be one of the most cost-effective players in Europe.

As well as strengthening and consolidating its position in Norway the bank is using its core competencies in selected industries – shipping, energy and seafood – to build its international operations.

Portugal

Banco Santander Totta

Among the major Portuguese banks, Santander Totta stands out as the only one not to require any kind of state aid as the country’s economy suffered from the sovereign debt crisis. With a firm Tier 1 capital base of 12% (three percentage points higher than mandated by the Bank of Portugal), the bank has been able to ride out the storm and keep non-performing loans (NPLs) at 2.24%, with a coverage ratio of 104.5%.  

CEO António Vieira Monteiro says: “In a very complex year for the Portuguese economy, and having already attained very good capital and liquidity ratios, the NPLs became a major priority for us. Therefore, throughout the year the bank has implemented an innovative programme with different solutions to ensure flexibility for the payments assumed by the customers.”

Among other initiatives designed to ease pressure on clients, the bank has a programme called ‘SME Invest Lines’ to support small businesses and another called ‘Export Invest Line’ to assist exporters. A department of customer experience was also launched to improve staff training and service delivery.

“Santander Totta will use its excellent capital and liquidity position to continue to support the Portuguese economy, particularly small and medium-sized enterprises and exporters, and continue with leading treasury solutions for companies, such as leasing, factoring and confirming. Also, in the retail market we will focus on affluent clients and small businesses, and we will maintain our rigorous credit risk policies,” says Mr Vieira Monteiro.

With Portugal facing huge economic challenges and the bail-out of the government, all the major banks needed assistance. Santander Totta stood out as the only large bank that did not need any kind of recapitalisation or public guarantee for its debt issues. Net financing in 2011 from the European Central Bank amounted to E3.75bn, lower than was needed the previous year.

Spain

BBVA

With the Spanish economy in crisis, the challenge for its banks is to remain profitable and resilient, and BBVA has managed to keep its return on equity in double figures at 10.6% and its non-performing loan ratio at 4.8% (significantly below the sector average of more than 6%).

The bank has worked hard at reducing its exposure to the country’s troubled commercial real estate sector, while at the same time benefiting from a flight to quality as large parts of the Spanish banking sector undergoes a restructuring.

Jaime Sáenz de Tejada, BBVA’s head of Spain and Portugal, says: “In this difficult context, we are gaining market share in key products such as payroll and pensions, while increasing our customer base, benefiting from the lack of focus on commercial policies of our competitors [many of which] are involved in a deep restructuring process.”

“Our differential behaviour confirms BBVA as one of the most solid institutions in the Spanish market, allowing us to take advantage of the consolidation process in the Spanish financial system.”  

On the property front, BBVA had reduced its market share of loans to developers to 6.6% by the end of 2011, which is only about half its business market share. Equally, loans to developers make up 8% of the credit portfolio compared to 12% for the system.

BBVA is transforming its customer service with a multichannel distribution model as well as a combination of larger branches with specialised sales forces together with smaller branches for basic requirements.

Mr Sáenz de Tejada says: “BBVA remains one of the most solid institutions in the Spanish market, so we can comfortably focus on gaining clients’ market share and increasing customer loyalty while developing our long-term competitive advantages: a differential customer experience and a multi-channel and integrated distribution model, with the latest technology.”

Sweden

SEB

Focusing on three strategic growth areas has enabled SEB to analyse and exploit opportunities in certain segments and markets. SEB’s CEO, Annika Falkengren, says the bank’s focus on Nordic and German corporates, Swedish small and medium-sized enterprises and long-term savings were its main achievements of the year.

With regards to its products, the bank continued to streamline cash management, trade and supply chain and receivables finance to improve working capital management, and also integrated its foreign exchange and web-based forecast modules into its C&I Services Online platform, enabling clients to handle foreign exchange activities in one solution.

“As a result, more customers have chosen SEB and existing customers have chosen to do more business with us. We have increased income, enhanced our financial stability and improved our productivity. Customer satisfaction and loyalty has improved,” says Ms Falkengren.

SEB’s Tier 1 capital grew by 5.6% in the 12 months to the end of 2011 to SKr107.7bn ($15.88bn). Its assets increased by 8% in fiscal 2011 to SKr2363bn and net profit soared by 64% year on year to SKr11.14bn. Its cost-to-income ratio was 61%, four percentage points lower than it was at the end of 2010. Return on equity increased from 8.65% to 10.77%, while the non-performing loan ratio fell by 40 basis points to 1.4%. By the end of 2011, SEB’s operating profit had risen by 35% on 2010’s figures, indicating strong customer demand.  

Although outside the eurozone, SEB offers clients one format and one point of entry to manage all payments within Sweden, Denmark, Norway and the eurozone as part of the migration to the Single Euro Payments Area. It also offers a foreign exchange prime brokerage service with support teams in Asia, Europe and the US, which has an open architecture technology platform that supports real-time trade capture.

Switzerland

UBS

UBS paid a high price for the revelation of losses racked up by one rogue trader in September 2011, namely the loss of its respected chief executive and pressure from investors and regulators to overhaul its business model. But the resultant soul-searching might just be what the bank needed, encouraging it to reduce risk-weighted assets, increase capitalisation and focus back on its core Swiss wealth management business that remains one of the best in its industry.

That quality is reflected in the resilient performance of the UBS retail, private banking, corporate and institutional business in Switzerland, where profits rose 8.3% in 2011. The Swiss wealth management business saw a net 47% new money inflow, while third-party assets under management more than doubled. Many business lines saw their fastest growth since 2007.

“Once more, our Swiss business confirmed its key significance to the UBS Group, contributing more than half of the group’s profit before tax while accounting for less than a quarter of its risk-weighted assets. More than ever, we believe our strong capital, liquidity and funding positions, as well as our client-driven universal bank model in Switzerland, clearly speak in our favour,” says Lukas Gähwiler, CEO of UBS Switzerland.

Mr Gähwiler says the success of the universal banking model in Switzerland is well demonstrated by the fact that 20% of UBS’s domestic revenues derive from cross-segment collaboration. Client satisfaction with this approach contributed to net new client money inflows of 3% in the first half of 2012. The bank has also improved its transaction banking capabilities for corporates, and continues to invest in technology across all segments.

“Investing in our electronic and mobile channels as well as in our branch network will further reinforce our distribution power. Combining these pre-eminent platforms with superior advice and outstanding solutions will allow us to sustainably strengthen our leading position in Switzerland,” says Mr Gähwiler.

Turkey

Garanti Bank

Turkey’s banking sector may be viewed worldwide as a hub of innovation with a credit-hungry customer base, but Turkish banks had a tough year. National macro-prudential regulation included a 25% cap on lending growth, a cut in interest rates and an increase in deposit reserve requirements.

The winner of The Banker’s country award, Garanti Bank, thus focused on diversified funding sources, including the divestment of its 20% stake in Eureko Insurance and other non-banking assets, creating extra $176m liquidity.
Ali Fuat Erbil, executive vice-president, financial institutions and corporate banking at Garanti Bank, says the lender gained the highest market share in the country in demand and Turkish lira deposits in 2011 thanks to a selective growth strategy and prudent margin management.

It also tapped into the “hidden” market of gold deposits. As gold is traditionally kept at home in Turkey, the bank now offers the first gold-saving credit card in the country’s banking sector based on its well-regarded Bonus loyalty scheme, and a gold savings account. The offering was so successful that the numbers signing up to the gold account grew four times as much as regular accounts.

In terms of small and medium-sized enterprises (SMEs), Garanti focused not only on lending, but also consultancy services and organising events, including Facebook chats. It also introduced Garanti Payment, a product that is available online and guarantees the future payments of SMEs. With this, Garanti provides financing if the buyer’s account has insufficient funds, and offers to buy the receivables accounts from the seller at a discount before the due date.

Garanti Bank had the highest pre-tax profits in fiscal 2011 among banks in Turkey and grew its assets base by 19.5%.
“We deepened our relations with retail and commercial customers. We believe that our unyielding efforts to shape the future of the banking sector will continue to place Garanti ahead of the competition,” says Mr Erbil.

UK

Santander

In a battered and bruised UK banking sector, it remains the case that Spanish-owned Santander is the best in class. The bank’s efficiency ratio is 44%, compared with a sector average of 59%, and its return on average tangible common equity is 16%. While the industry non-performing loan average is 8.28%, Santander achieves 1.93% and its exposure to troubled eurozone countries is less than 1%, with 85% of all assets UK based.

In fact, the UK bank contributed 13% towards group income in 2011, the second largest contribution after Brazil, even after setting aside provisions for the settlement of insurance claims relating to the mis-selling of loan insurance.

Good IT systems have always been central to Santander’s success, and the bank is investing £490m ($306m) over the next three years to further improve its IT functionality and capabilities. It has also returned all of its call centres to the UK from India.

As in most European countries, the financing of small and medium-sized enterprises (SMEs) has become a political issue in the UK. Santander aims to become the SME bank of choice and has ratcheted up 25% growth in lending to this sector. In addition, the bank lent money to SMEs under the UK government’s Project Merlin initiative, and a £200m mezzanine fund called Breakthrough was created to support SMEs.

On the retail side, the aim is to shift away from a product focus to a customer focus, leading to huge uptake in areas such as credit cards and current and savings accounts. The bank lays great emphasis on development and training of staff to support these moves.

Ana Botín, CEO of Santander UK, says: “Our retail strategy is to offer good value, simple and transparent products and to develop primary banking relationships with our customers. The strength of our balance sheet, with a core Tier 1 ratio of 12.8%, leaves us well positioned to continue our transformation into a full-service UK bank serving the needs of individuals, families and businesses.”