As previously noted in this column, retail banking lines of business have delivered enviable levels of margin and growth over the last three years.

Comparing the share of income derived from retail banking to cost/income ratio, TowerGroup notes that many top global banks have been able to take advantage of this trend to drive additional scalability and efficiency by moving into mass-market banking.

We observe that specific institutions like Abbey, Wells Fargo and Santander are underperforming (based on their retail banking mix) whereas others – Mizuho, HBOS, and Citigroup – are overperforming. As we move toward 2005, will retail banking maintain its hold on the business, or will banks like Mizuho and Barclays take further advantage of their cost advantages as the emerging rebound in capital markets and wholesale banking gathers momentum?

James R Eckenrode is vice-president of the Banking and Payments practice at TowerGroup, a leading advisory research and consulting firm focused on the global financial services industry. E-mail: jim.eckenrode@towergroup.com

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