UK bucking trend of growing pessimism among European banks, study finds

Only 52 per cent of respondents to EY’s European Banking Barometer expected performance in their industry to improve in the coming year, down from 56 per cent in 2015.

An EY spokesman said: “The outlook amongst UK banks, in line with a growing European-wide pessimism about the sector, has fallen over the last year as risk, regulation and cost cutting dominate the agenda.”

However, there are some bright spots. The study found that UK bankers anticipated growth in debt and equity market issuance in 2016, with 83 per cent predicting a good outlook for the business line.

Increased capital markets activity is also expected, which could in part be attributed 
to the ongoing low rate funding environment coupled with
confidence in UK corporate activity.

Corporate and retail banking are also rated as having an improved outlook this year, with 68 per cent and 67 per cent of respondents, respectively, rating their outlook as “good” or “fairly good”, the study found.

Karl Meekings, EY’s global banking & capital markets lead analyst, said: “While the UK banking sector is not immune from the continent-wide sense of pessimism in the industry, the more positive outlook in the UK economy is supportive of individual business lines.

“The optimism felt by capital markets bankers in particular reflects enhanced corporate appetite for transformative deals, including M&A, supported by continuing low interest rates and the newly evident trend of looser lending requirements from the banks themselves.”

Headcount reduction is likely to be at its highest since 2012, with 56 per cent of UK bankers predicting it will occur, compared with 34 per cent last year, the survey found.