Riches found in mid-market, European study finds
(27 January 2004 – Europe) Banks should be focusing on mid-market companies rather than large corporates as this segment is set to double over the next five years, a European study has found.
The report by financial services consultants Mercer Oliver Wyman said mid-market companies across Europe, which is defined as companies turning over €10 to 250 million (A$16 to 405 million), accounted for €37 billion (A$60 billion) in revenues and €14.5 billion (A$23.5 billion) in gross profits for banks.
Managing director Simon Harris said that for too long business banking had been viewed by banks as a "backwater" when it should be their "backbone".
"It offers one of the largest potential opportunities in European banking today: as much as €1.2 billion in additional economic profit – equivalent to €4.1 billion in gross operating profits and €8.4 billion in revenues – is up for grabs to those banks which concentrate on business banking," he said.
"Crucially, in each market there is scope for banks to improve, whether in attractive markets such as the UK and Spain, or currently less attractive markets like Germany."
The consultants said equity analysts and senior management inside banks were guilty of overlooking business banking, instead focussing most of their efforts on international companies that were ripe targets for US investment banks.
Managing director Simon Harris said that for too long business banking had been viewed by banks as a "backwater" when it should be their "backbone".
"It offers one of the largest potential opportunities in European banking today: as much as €1.2 billion in additional economic profit – equivalent to €4.1 billion in gross operating profits and €8.4 billion in revenues – is up for grabs to those banks which concentrate on business banking," he said.
"Crucially, in each market there is scope for banks to improve, whether in attractive markets such as the UK and Spain, or currently less attractive markets like Germany."
The consultants said equity analysts and senior management inside banks were guilty of overlooking business banking, instead focussing most of their efforts on international companies that were ripe targets for US investment banks.
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