The future of the Belgian banking industry: the executives’ point of view

Belgian banks are currently operating in a low growth, low interest rate environment, which is putting pressure on the main value driver for most banks: net interest income. At the same time, a vast body of regulatory rules is heading for the sector, which will require implementing new requirements and compliance procedures.

So, how are Belgium’s banks navigating this post-crisis landscape – and what is the outlook for the next few years?

To answer these questions, Prof. André Thibeault and Thomas Matthys of the Vlerick Centre for Financial Services (CFS) conducted a survey on the future of the Belgian banking industry. The study forms part of a Prime Foundation Partnership project between KPMG and the CFS.

The survey was conducted through personal interviews with the executives of 15 Belgian banks, which altogether represent 92% of the sector in terms of total assets. To conclude the interviews, the authors asked the executives for their views on the future of the Belgian banking landscape in the coming 5-10 years.

A new consolidation phase

About 80% of the executives are convinced that the number of banks in the Belgian landscape will decrease through a further consolidation phase, which is expected to start two years from now. The bankers feel that, at the present time, there is not enough cash to engage in merger and acquisition (M&A) activity, and also that the regulator will probably not look favourably on reduced competition just yet.

However, after this transition period, and if the macroeconomic outlook becomes clearer, M&As are likely to rise again. Small banks will be able to continue to serve their niche markets and remain profitable. But medium-sized banks – which have a large customer base compared to the small banks, but lack a big bank’s economies of scale – may become acquisition targets in the future.

Furthermore, the financial crisis marked a period of reduced Belgian ownership, especially in the case of large banks. A pan-European banking network is expected to develop in the near future, through which some of our banks will become part of a larger group. And finally, in the longer run, the executives think the presence of four large banks will be unworkable in a country of only 11 million inhabitants.

Read the full report: "The future of the Belgian banking industry - the executives' point of view"

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