Bank of the Year Awards 2019 - western Europe
The best banks in 2019 from western Europe.
Andorra’s MoraBanc has once again demonstrated the right mix of innovation, ambition and customer service excellence to emerge victorious in a highly competitive country category. The lender’s net profits over the 2018 review period increased by 2.3%, while total assets expanded by 8.1%. MoraBanc’s return on equity, meanwhile, came in at 8.6%, while its cost-to-income ratio was relatively high at 62.9%. The ratio of non-performing loans at the bank remained relatively steady at 3.8%.
In 2019, MoraBanc executed a significant transaction for its domestic market position by acquiring the financial unit of the Pyrénées Group, Andorra’s largest retail conglomerate, to develop its consumer finance business. The products to be developed with this partnership include auto financing, credit cards and financing at the point of sale, among others. The bank’s stated objectives related to this transaction are numerous but broadly linked to a desire to expand its reach across the consumer finance space and to gain new clients with cross-selling campaigns. Given that about 50% of Andorran families have a Pyrénées group card, according to MoraBanc, the scope for future growth opportunities is significant.
Meanwhile, MoraBanc reached an agreement with Goldman Sachs Asset Management to offer its customers unique investment services in Andorra. The agreement will see the Andorran bank’s clients gain access to exclusive information, as well as a broader and more personalised range of services in terms of their portfolio management.
“We are a client-focused team of people who believe in what we do in a working environment prone to change, innovation and creativity. These ingredients, together with ambition and constant focus, have given us the leadership in an ever more transparent, competitive and demanding market,” says Pedro González Grau, chairman of MoraBanc.
Austria, Erste Bank und Sparkassen
In Austria’s competitive banking market, Erste Bank und Sparkassen enjoyed a notable period of growth over the 2018 review period. Net profits increased by 36%, after rising by 4% in 2017 and 30% in 2016, while total assets and Tier 1 capital expanded by 7.3% and 6.9%, respectively. More impressively, the lender’s return on equity in 2018 increased to 13.4% from the 10.1% recorded in 2017. This was accompanied by a cost-to-income ratio of 60.5% and a non-performing loan ratio of 3.2%.
The bank’s strong results were accompanied by some eye-catching initiatives. For instance, in April 2019 Erste Bank became the first Austrian financial services provider to make Apple Pay available to its customers. This service provides an easy, secure and efficient payment method for customers acquiring goods or services in stores, online or through apps. Meanwhile, in the same month the bank launched its online and offline debit Mastercard as a substitute for the traditional Maestro card and in doing so became the first financial services group in Austria to launch this product. The card can be digitalised and added to the lender’s app, known as George, for contactless payments.
Meanwhile, as of May 2019 Erste Bank is promoting affordable housing options in Austria through an agreement with the European Investment Bank. Each party is offering €100m to this endeavour in order to facilitate the provision of investment resources with fixed interest rates and terms of up to 28 years.
“Erste Bank’s success is largely due to the fact that we’ve stayed true to our founding purpose. Above all, that means seeing the societal relevance in helping people to achieve financial health,” says Erste Bank chief executive Peter Bosek.
BNP Paribas Fortis’s socially responsible approach to business, coupled with a strong set of results, have seen it emerge victorious in the 2019 Belgium country category. In a strategy update initiated in 2019, the bank embedded socially responsible investing (SRI) as a basic tenet of its operating policies. In practice, this means the bank’s investment advisors will, for example, offer SRI solutions first before looking to traditional investment options. A fourfold increase in SRI investing has been registered by BNP Paribas Fortis between 2014 and 2018, while this trend has accelerated in 2019.
In addition, the bank intends to increase loans granted to projects that are based on sustainability, as well as those linked to the UN Sustainable Development Goals. This includes projects linked to the non-trading sector, such as hospitals, schools and universities, as well as lending to social entrepreneurs. It also includes projects in the environmental sphere, such as renewable energy facilities and installations and recycling initiatives. In 2018, the bank allocated Ä8.6bn-worth of loans, out of a total of €106.1bn, towards projects in line with this agenda.
On the innovation front, the bank launched a secure open banking portal in March 2019, which gives external developers, fintechs and innovators easy access to the requisite information to develop digital solutions by using the bank’s application programming interfaces. By connecting to this portal, developers are also granted access to the bank’s sandbox, where they can test and develop products and services using dummy data. The sandbox is open to any developer that registers on BNP Paribas Fortis’s open banking portal, though to officially launch a new service, third-party providers must obtain certification from the regulator, the National Bank of Belgium.
OP Financial Group has introduced a range of new products and services over the past year, underlining its commitment to innovation and customer service excellence. This includes the development of a digital mortgage platform in 2018. In Finland, 70% of residents are owner occupiers, meaning that mortgages are a key feature of the country’s financial services landscape. Not only are these profitable for Finnish banks but they also lead to enhanced customer loyalty.
In order to strengthen its position in the country’s mortgage market, OP Financial Group introduced a digital mortgage offering in 2018, which has been made available to retail customers across all OP co-operative bank locations in Finland.
The platform is fully digital, allowing for electronic applications, and employs an artificial intelligence solution to conduct credit decisions. By using information the bank holds on each customer, as well as new data points provided by the client, the bank can reach a decision on each application more quickly, so a loan promise is provided within a matter of minutes. Once the customer has had an opportunity to review this promise, they can negotiate or finalise the offer either digitally or in a branch.
OP Financial Group’s return on equity in 2018 was 6.9%, while its cost-to-income ratio was 57%. Non-performing loans were low, at just 1% over the same period, and the bank’s total assets and Tier 1 capital increased by 2.3% and 7.9%, respectively, for the year.
“At OP Financial Group, we strive to improve customer and employee experience, deliver value for our 2 million owner-customers, and pre-empt changes in our business environment,” says Timo Ritakallio, president and group executive chair at OP Financial Group. “To achieve this, we started a major transformation process a year ago to move to an agile operating model and an ongoing strategy process.”
Crédit Mutuel enjoyed an outstanding year of growth in 2018. The bank’s net profits were up by 17.2%, while its total assets and Tier 1 capital expanded by 4.8% and 6.9%, respectively. The lender’s return on equity was 6.6%, while its non-performing loan ratio was 3%. At the heart of the group’s success story is the adoption of technology to enhance customer relations, as well as the customer experience more generally. This has led the bank to deploy innovative and best-in-class solutions across France, such as electronic signatures and files, as well as advanced payment methods and service platforms.
In the fintech space, Credit Mutuel’s regional groups have developed a significant position in their respective fintech ecosystems. The group has adopted an innovative universal mobile payment method, Lyf Pay, while the use of IBM’s Watson solution, a customer service artificial intelligence product, is also being used across the bank.
Meanwhile, Crédit Mutuel Nord Europe has launched ‘Innovation Labs’ to work on solutions to help the bank advance to the next stage of its growth potential. Numbering 10 locations and employing 60 specialists technicians, these labs have so far delivered several innovative outcomes, including a mobile recruitment app for the group, with more offerings in the pipeline.
Meanwhile, the group has deployed wireless access points (using wi-fi technology) across its branch network in France. According to Crédit Mutuel, the objectives behind this investment are threefold: to enable the use of tablets, particularly those used for electronic signatures; to allow customers to connect securely to the bank’s networks; and to facilitate employees’ mobility in branch locations while maintaining access to the lender’s information systems. Additionally, the redesign of the bank’s mobile app in 2018 went hand in hand with a switch to push notifications from SMS alerts.
Commerzbank’s turnaround story is gathering momentum even as the bank contends with a challenging outlook linked to cooler growth in the euro area. Net profits in 2018 surged, reaching Ä865m, up from the Ä128m recorded in 2017. Meanwhile, total assets expanded by 2.2% over the same period. Commerzbank’s net return on equity was 3.1%. Much of the bank’s progress in recent years is linked to its strategic priority of reshaping the business into a digital enterprise. It has the stated objective of digitising 80% of relevant business processes by 2020.
One area considered ripe for a digital overhaul by the bank is trade finance. Given that many processes along the trade finance supply chain are executed manually, there is significant scope for the introduction of technologies such as blockchain to increase efficiencies and lower costs. In 2018, Commerzbank employed a worldwide blockchain solution to help its client, Audi, export vehicles to Spain.
In addition, in November 2018 Commerzbank established an enterprise lab, known as the Trade Finance Innovation Lab, at the Fraunhofer Institute for Material Flow and Logistics in Dortmund. The lab will harness the latest innovations to develop cutting-edge payment and finance solutions based on distributed ledger technology, smart contracts and the Internet of Things, among other solutions.
“At Commerzbank, our goal is to make life easier for our customers. Our bank was founded almost 150 years ago by Hanseatic merchants in the city of Hamburg to support our customers’ business around the globe. It is in Commerzbank’s DNA to put our customers at the heart of all we do, and I believe this is our greatest strength,” says Martin Zielke, chairman of the board of managing directors at Commerzbank.
Kvika banki has pursued a bold growth strategy in recent years that has included several notable acquisitions. This inorganic growth plan is being executed with the aim of becoming a leader in the asset management sphere, where the bank can generate more stable and higher quality revenue streams and depend less on irregular income flows, as well as sources of income with high capital requirements.
In the wake of Kvika’s acquisition of asset manager Virding and fund management company Alda in 2017, the bank completed the purchase of Gamma Capital Management, an asset management group with Ikr140bn ($1.1bn) of assets under management, in March 2019. As a result, Kvika has emerged as the second largest asset manager in Iceland.
In light of these acquisitions, the bank has worked to overhaul its support functions and back-office processes to handle the increase in activity and to develop operational synergies and efficiency. To achieve this objective, Kvika has invested heavily in robotic process automation (RPA), particularly in the domain of foreign payments, where it was found that manual processes were still dominant.
Launched in August 2018, the project initially started with a mapping of the bank’s RPA requirements before going live in January 2019 by handling inbound foreign payments. Initial investment costs linked to the development of the bank’s RPA solution were recouped within four months, according to Kvika. Processes in securities clearing and settlement are now being mapped for RPA.
“Kvika has focused on long-term partnerships with selected customers based on mutual respect and trust for both beneficiaries. This year, we took the initiative to enter new markets with innovative products, to further expand our customer base by leveraging our existing infrastructure and building foundations for future growth and services,” says Marinö Orn Tryggvason, chief executive of Kvika banki.
In a challenging market environment, Mediobanca has emerged as an exemplary success story in Italy’s banking sector. An ambitious growth strategy has bolstered the bank’s profitability, with its return on equity hitting 10% over the 2018 review period. Meanwhile, its cost-to-income ratio was just 46%, while its net ratio of non-performing loans came in at 2%.
“Our distinctive business model is focused on three highly specialised banking segments – wealth management, consumer banking and corporate and investment banking,” says Mediobanca chief executive officer Alberto Nagel.
Indeed, Mediobanca reached a long-term strategic partnership with French corporate finance house Messier, Marris and Associes (MMA), in which the Italian lender acquired a 66% stake in MMA in April 2019. In doing so, Mediobanca has secured a high-profile presence in France, which is a core market for the lender’s corporate and investment banking division. It also advances Mediobanca’s objective of pursuing capital-light activities as well as its ambition to become a leading pan-European investment banking player.
Meanwhile, CheBanca!, the multichannel digital offering from Mediobanca, has introduced robotic process automation in its services. This includes the introduction of a chatbot that can interact with customers and act as a virtual assistant, thereby reducing the workload on the bank’s human staff while expanding the bank’s customer service offering to 24 hours a day.
“Sustainability and distinctiveness, on the back of our strong positioning in specialist businesses whose growth is driven by long-term trends, are what makes our company different from others. Quarter after quarter, the Mediobanca Group stands out for our ability to grow, our continuing investment in people, innovation and distribution, our strong capital position and our asset quality, which remains at the best levels in Europe,” says Mr Nagel.
LGT Bank has gone from strength to strength in recent years. Net profits increased by 23% in 2017 and 11% in 2018, while the bank’s return on equity grew from 6.9% to 7.6% over the same period. These numbers have been underpinned by a raft of strategic initiatives that captured the attention of the judging panel. In 2018, the bank launched its Sustainability Strategy 2025, in which it has identified eight of the UN’s Sustainable Development Goals that it can contribute to through its advisory, impact and investment business. Moreover, the bank will also consider sustainability more generally in all areas of its business, decision making and products moving forward.
The bank believes it can follow an investment path with higher returns and a reduced carbon footprint. For example, in 2018 LGT’s Sustainable Equities Strategy saved more than 80 metric tonnes of carbon emissions compared with the benchmark MSCI World Index, according to data from the bank. This strategy also outperformed the benchmark, demonstrating that sustainable investments can also generate notable returns for investors.
LGT has also launched a sustainability rating for both bonds and equities. Under this rating system, the bank provides a transparent assessment of the sustainability rating of different investments, which helps clients to align their portfolios with their personal values. The bank makes use of about 20 frequently updated criteria to score each equity or bond. A star rating is then offered for each security.
“With the Princely Family of Liechtenstein as our owner, and our headquarters in [the capital] Vaduz, we remain strongly rooted in Liechtenstein. Our origins give our clients a high level of stability. However, we are also present in all key financial centres and offer our clients international investment expertise. This combination is something they value highly,” says Roland Schubert, chief executive of LGT Bank.
Luxembourg, Banque Internationale à Luxembourg
Banque Internationale à Luxembourg (BIL) impressed the judging panel based on its commitment to product and service innovation, as well as the extent to which it has put the customer experience at the heart of its business strategy. The results of this approach are clearly paying off as the lender registered a 5% increase to its net profits in 2018. In addition, its return on average tangible equity in 2018 was 14.3%, while its cost-to-income ratio (excluding non-recurring items and capital gains) was 74.6%, and its ratio of non-performing loans (excluding non-core activities) was 2.4%.
In 2018 the bank overhauled the look of its mobile app, BILnet. With a fresh look, the app boasts a range of best-in-class security features, such as biometric- or PIN-based security checks for simpler transactions, or by LuxTrust authentication, which makes use of a security token for more complex transactions. Meanwhile, the app also allows for account opening to be conducted entirely online. Through a video chat with a member of bank staff and electronic signatures, among other features, new and existing clients can easily open a new account with BIL.
BIL is also taking steps to augment its position as Luxembourg’s leading entrepreneur-friendly bank. As an active participant in start-up financing, the lender continues to work with the European Investment Fund (EIF) to support the country’s entrepreneurs. In April 2019, the EIF increased by E10m its backing for BIL-issued loans dedicated to the country’s business owners.
“We do everything to make our clients’ plans possible. Regardless of whether they are local house buyers or international investors, our clients know that we truly care about them and we collaborate to create cutting-edge solutions together. They particularly appreciate our ability to innovate for a brighter future,” says Marcel Leyers, chief executive of BIL.
HSBC Bank Malta’s track record of success in our Bank of the Year awards is testament to an institution that has successfully navigated many of the challenges facing the domestic market and wider region in recent times.
In order to address the growing risks linked to money laundering and terrorist financing, for instance, HSBC Bank Malta has enacted a far-reaching reform of its business to meet the highest global standards in this domain and to protect its clients and the country. Though this has hit the lender’s profitability in the short term, the changes are expected to deliver long-term benefits by contributing to the growth of a stronger and safer bank.
Through a custom-made programme the lender has trained its 1300 staff on the risks that are facing the bank, with each session personally launched by a member of HSBC Bank Malta’s executive committee. The impact of this training, as well as the wider strategic initiative adopted by the bank, was immediate. Potential compliance cases identified by bank staff increased by 600%, while HSBC filed 85% of all suspicious reports to the national regulator.
On the technology front, the bank is harnessing Malta’s position as a Mediterranean tech hub and launched a world-class corporate digital offering known as HSBCnet. The ambition with HSBCnet is for a corporate treasurer to be able to run a global company from Malta. The bank sees the global connectivity that comes with offerings such as HSBCnet as a key competitive advantage in the market.
“Winning this prestigious award four years in a row has been possible because we anticipated emerging trends in our industry and took bold action to position HSBC as the market leader. Success is about more than strategy; purpose matters to us and the actions we take always connect to this,” says Andrew C Beane, chief executive of HSBC Bank Malta.
Santander Portugal has developed a commanding position in Portugal’s banking market in recent years. This growth story has emerged as a result of the lender’s customer-centric development strategy, as well as its commitment to digital innovation. The bank’s net profits in 2018 grew by 14.6%, while its total assets expanded by 3.5%. This was accompanied by a return on equity of 12.4%, a cost-to-income ratio of 50.1% and a non-performing loan ratio of 4%.
Meanwhile, the bank has identified its digital transformation as a key priority in its strategic plan for 2021. As part of this plan, the bank is deploying a new ‘agile’ work methodology, which it describes as a new way of working by combining the knowledge of different teams with a more innovative, collaborative and digital approach to achieving its objectives.
An example of this includes the development of ‘Open House’, a new workflow platform for mortgages. The process reduces the time it takes to secure a mortgage to no more than 25 days, while easing the administrative burden of applications on the bank’s branch network by freeing them of some associated tasks.
“Santander Portugal continues to register sustained growth, centred on closer customer service supported by our digital transformation,” says Pedro Castro e Almeida, chief executive of Santander Portugal.
“This is a strategy that has been trusted by our clients, as shown by the results achieved in September 2019: a net income of Ä390.6m, market shares of new loans to companies and mortgages of about 20%, a growth of 5% in resources, and respective 5.1% and 12% rises in our main bank and digital customers, compared with the same period in 2018,” he adds.
Santander Spain enjoyed strong growth in 2018. The bank’s net profits increased by 47.3%, after expanding by 15.4% in the previous year. Total asset growth was also up in 2018 by 23.7%, while Tier 1 capital grew by 3.4%.
The bank has also successfully integrated Banco Popular, which it acquired in June 2017, into its operations, contributing to a unique domestic consolidation opportunity. It has identified four key priorities linked to this acquisition that it hopes to leverage moving forward: the creation of additional shareholder value; improving its small and medium-sized business franchise; leveraging Santander Group’s strengths; and enhancing digital transformation.
“We have successfully completed the integration of Banco Popular. This acquisition allows us to confront a new chapter, from a competitive position and acting as a responsible bank, in which we maintain profitability in a scenario of economic slowdown and negative interest rates. We will do this supported by digitalisation, improved efficiency and greater customer loyalty,” says Rami Aboukhair, chief executive of Santander Spain.
Meanwhile, when it comes to technology, the bank is updating its customer relationship model for the digital age. This includes the creation of a remote service model known as Santander Personal, which is a dedicated digital financial adviser. The adviser can be reached via the bank’s mobile app on a range of communication channels, 24 hours a day, seven days a week and in seven different languages.
Beyond this, Santander Spain has also launched its SmartBank offering, targeting the country’s youth to reinforce its position among this market segment. Launched in January 2019, SmartBank has already achieved notable success by reaching 700,000 customers, including 371,000 entirely new customers. This growth is partly due to the offering’s customer loyalty and relationship model, as well as direct marketing through digital channels, among other initiatives.
In a highly competitive country category, UBS impressed the judging panel with its ambitious growth strategy, its commitment to enhancing the customer experience, and its strong set of results. In June 2019, the bank agreed a strategic wealth management partnership with Sumitomo Mitsui Trust Holdings (SuMi Trust Holdings) in Japan.
The joint venture – 51% owned by the Swiss lender – will see UBS’s global capabilities in wealth management allied with SuMi Trust Holdings’ position as Japan’s largest independent trust bank. The two institutions will be able to offer more products, investment advice and services than either can currently deliver independently. Notably, for UBS’s customer base, the joint venture will open a full range of Japanese real estate and trust services for investment.
In May 2019, UBS added its second so-called ‘digital factory’ location in Zurich. The bank’s digital factories – found across its global network – bring together hundreds of experts from sectors including business, information and communication technology and law to develop the next products, services and offerings in the digital domain and to position the bank as the world’s leading digital financial platform.
Through a test-and-learn approach that balances innovation with risk, UBS is working to deliver high-quality change and innovation throughout its business. Importantly, the lender empowers staff to take ownership of these digital projects to foster an entrepreneurial ethos. UBS currently has digital factories in five global locations and employs about 800 personnel across this network.
“This year’s Bank of the Year award for Switzerland is a strong recognition of our successful strategic initiatives, both in our Swiss home market and globally. UBS excels in combining hi-tech and the human touch for a peerless, powerful and personal customer experience,” says Axel P Lehmann, president of UBS Switzerland.
Türkiye Is Bankası has successfully navigated the challenges of a more volatile domestic operating environment to secure a solid set of results in 2018. In local currency terms, the lender’s net profits, total assets and Tier 1 capital all increased. In addition, its return on average tangible equity was a healthy 15.5%, while its cost-to-income ratio came in at 36.4%.
Adnan Bali, chief executive of Türkiye Is Bankası, says: “As the largest private bank in Turkey, we own a brand that stands for trust, respectability and prestige in the eyes of our stakeholders in national and international markets. We always stand by companies, investors and entrepreneurs with our solid financial structure while contributing to the Turkish economy.”
But it was the lender’s eye-catching innovations that impressed the judging panel this year. In particular, standout initiatives included the opening up of its application programming interface (API) portal to third-party developers and fintechs, to develop innovative products. The bank’s portal was initially opened with 14 APIs available, but as of 2019 this number has increased to 26 and includes loan processes, money transfer, exchange rates, deposit rates, account movements and balances.
Meanwhile, the bank’s deployment of a humanoid robot called Pepper to some of its Istanbul branches in November 2018 has enhanced the customer experience. Pepper can talk to clients, introduce them to digital channels and inform them about exchange rates and the weather, among other functions. By the end of 2019, Pepper will be deployed across 15 branches.
“Undertaking a pioneering role in the Turkish banking industry since 1924, today we remain focused on the future and innovation by uninterruptedly continuing our investments in technology to deliver our customers the best opportunities presented by digitalisation,” says Mr Bali.
Despite being the UK’s largest digital bank, boasting 15.9 million digitally active users, Lloyds Banking Group is not resting on its laurels. The bank is investing £3bn ($3.9bn) into further digitising its operations, products and services as part of its third strategic plan from 2018 to 2020 (representing a 40% increase on its previous strategic plan).
Among other initiatives, this investment is being poured into cloud solutions, as well as in seeking external expertise to accelerate the bank’s digital transformation. In addition, Lloyds has entered into several partnerships with UK fintech groups to explore how their various platforms can enhance the bank’s IT architecture and improve the customer experience.
“At Lloyds Banking Group, our market-leading efficiency enables us to make superior investments for our customers. We operate the largest digital bank in the UK and continue to enhance our digital propositions and services, while remaining committed to a multi-channel distribution model,” says António Horta-Osório, group chief executive of Lloyds Banking Group.
The bank’s strategy is paying off. In 2018, it achieved a statutory return on tangible equity of 11.7%, while its statutory profits before tax grew by 24% to £4.4bn. And, despite a 10% increase in investment expense and depreciation, Lloyds Banking Group achieved a cost-to-income ratio of 49.3%. Beyond these results, the bank has also supported vital sectors of the UK economy. Since the beginning of 2018, Lloyds has increased net lending to start-ups, small and medium-sized enterprises and mid-market entities by £3bn.
“Our unique business model and focus on the UK’s real economy enables us to help the country prosper while growing dividends for shareholders. I am delighted this has been recognised and the group has won this prestigious award for the seventh consecutive year,” says Mr Horta-Osório.
