Best Banks In Western Europe 2019: Digital Transformation Drives Growth

Banks in Western and Northern Europe zero in on the needs of customers and communities to boost profits.

Banks in Western Europe have weathered much change since the financial crisis. They have adapted to a raft of regulations intended to reduce systemic risk and opportunities for fraud while simultaneously adapting new technologies. Further complicating matters, the last year saw much scrambling in anticipation of Brexit, which, regardless of the final outcome, has reshaped financial services in the City of London.

Generally, in the years since the crisis, the best-performing banks in Europe have been those maintaining a tight focus on the domestic market while wielding digital innovations to clearly understand customers’ aspirations and needs. Our regional winner, CaixaBank, is an outstanding example of how this focused approach can boost business volumes and enhance profitability.

Over the past decade, CaixaBank has expanded rapidly through strategic acquisitions and organic growth to become Spain’s leading customer-facing bank. During 2018, it enlarged its market share in retail banking to 29.3%, primarily through its lead in digital banking. Having built up the largest digital customer base of any Spanish bank, CaixaBank further increased its digital penetration to 32% last year, with more than 1.5 million customers visiting its website each day. During 2018 it made this easier by introducing the CaixaBankNow app, which acts as a gateway to other digital banking services and introduces more targeted apps that provide savings, stock market and investment advisory services.

Achieving digitization of nearly 100% of its processes also has increased the bank’s internal efficiencies, letting it develop more targeted offerings and helping to reduce its cost base over the long term. This translates into consistently greater profitability. CaixaBank surpassed its record 2017 results by increasing its net profit in 2018 by 17.8%, to nearly €2 billion ($2.25 billion).

Last year, the bank moved to full ownership of Banco BPI, the fifth-largest lender in neighboring Portugal. CaixaBank is well on the way to integrating the Portugese institution’s services, products and IT systems into a combined group which has evolved into the leading retail bank across the Iberian Peninsula.

Caixabank is also our winner in Spain, for nurturing an innovator culture, its skill in applying sharply focused new technologies, and its ability to respond to rapidly changing customer needs. Digitization has been key to its success, and by staying ahead of the curve, CaixaBank has built up a customer base of six million online and mobile users. As it accelerates its investment in new technologies, including blockchain, artificial intelligence (AI), predictive modeling and robotics, the bank is already benefiting from digitally enabled cost savings and higher sales volumes. Both net interest and fee income increased by 3.4% over the previous year, helping to boost the bank’s profit 17.8% to a record €2 billion. The sale of its non-core real estate business further strengthened its capital buffers, adding 14 basis points to the fully loaded Common Equity Tier 1 (CET1) ratio, which stood at 13% at year-end.

A clear understanding of its home market and strong digital capabilities combined to make Lloyds Bank, whose post-tax profit surged by 24% to £4.4 billion ($5.7 billion) in 2018, our Best Bank in the United Kingdom. Net income was 2% higher due to improved margins and significantly lower operating costs, which were achieved despite increasing investment in technology and new products. As a result, the bank’s cost/income ratio further improved to 49.3%, helping to fuel a 6% increase in underlying profit. The bank’s credit quality remained strong and organic capital generation helped strengthen its capital buffers, with the CET1 ratio standing at 13.9% at year’s end. CEO António Horta-Osório noted that “in 2018 we continued to grow our lending balances to SMEs and mid-market businesses by £3 billion, we have helped one in five first-time home buyers by lending £12 billion, and we have provided digital skills training to more than 700,000 people, SMEs and charities, alongside further investment in apprenticeship schemes.” However, Brexit’s impact on the UK economy has already affected corporate investors’ confidence and the housing market—key business sectors for Lloyds.

Of all 27 countries in the EU, Ireland will almost certainly be most impacted by the fallout from Brexit. Yet during 2018, our winner in Ireland, Bank of Ireland, surged ahead with a 13% increase in overall lending. Mortgage growth within the Republic of Ireland reached 17%, allowing the bank to maintain a 27% market share in home loans while maintaining strong commercial discipline on pricing. CEO Francesca McDonagh commented, “We have grown our loan book with net lending of €1.3 billion in 2018 as we support our retail and corporate customers across all markets.” The bank’s asset quality improved over the year, with non-performing loans reduced by 24% to €5 billion, while strong capital generation resulted in a fully loaded CET1 ratio of 13.4% at year-end.

Our Best Bank in France, Crédit Mutuel Alliance Fédérale, is owned by its member-customers, and ascribes much of its financial success to maintaining a strong local presence and customer focus. During 2018 it grew its loan book by 7.5%, helping to support local economies, and achieved an impressive 23.3% increase in net income. The bank’s Customer Member Priority program goes hand-in-hand with the acceleration of its digital transformation, with around 85% of consumer loan applications now performed via mobile apps. A high priority is given to the security of customer data. Crédit Mutuel Alliance Fédérale also made new commitments to further diversity and equal opportunities. Some 4,000 young people on work-study contracts will be recruited over the next two years, with the goal of offering 80% of the students an open-ended employment contract at the end of their assignment.

In Belgium, BNP Paribas expanded its lending to customers by 4.2% on the back of a sharp rise in corporate loans and mortgages, while deposits rose by 4.1%, thanks to growth in both current and savings accounts. The bank continued its digital development, with constant enhancements to its Easy Banking app bringing in 23% more users over the year. The number of companies using Easy Banking Business also increased sharply following the successful launch of a new mobile version, and the bank will benefit from its exclusive launch of Apple Pay, Apple’s mobile payment and digital wallet service, in Belgium. Overall revenues from retail banking were down by 2.2%, compared to 2017, due to lower net interest income, while operating costs were cut by 1.3%, thanks to the bank’s optimization of its branch network, and streamlining of management.

ABN AMRO is again our winner in the Netherlands, growing net interest income by 2% in 2018 and maintaining its profitability with a 1% improvement in operating results. In November, the bank launched a strategy focused on sustainability, with the slogan “Banking for better, for generations to come.”

“This means supporting our clients in their transition to sustainability, reinventing the customer experience and building a future-proof bank,” explains CEO Kees van Dijkhuizen. “Our financial performance, growing client demand and the support of our colleagues to help build a more sustainable society, and our investments in digitization, are all examples of ‘Banking for better.’ For Dijkhuizen, sustainability is a business opportunity, not a burden. “Although we won’t be the only bank doing this,” he says, “we want to be a front-runner.”

In Germany, merger talks between our repeat winner, Commerzbank, and Deutsche Bank have been in the spotlight. Although much the smaller bank, Commerzbank’s focus on its core markets and strong relationships with midsize corporates fed through to a rise in operating profits to €1.2 billion. Underlying revenues were up by 5%, while costs were contained despite further investments in digitization.

“We are growing in terms of customers, lending volume and underlying revenues,” says chairman Martin Zielke. “But given the challenging environment, we need to move even faster. That is why we are revamping our head office and interlinking the IT with our product areas. This will help us drive digitization forward and bring our offering to the market even quicker and more efficiently.”

Anas Abuzaakouk, CEO of our Best Bank in Austria, BAWAG Group, notes that “2018 was another record year of operating performance and our first full year as a listed company. We outperformed all of our targets, focused on the things we control and delivered on our promise of being good stewards of capital.” The bank’s pre-tax profit rose by an impressive 14% to €573 million, largely a result of higher revenues from its core retail and SME businesses within Austria, and lower risk costs. Net interest income rose by 6% and the bank’s operating costs were reduced by 2%.

“We also signed three new acquisitions and continued to make progress on integrations,” says Aubzaakouk, adding that BAWAG “will continue to maintain our low-risk strategy primarily focused on the DACH (Germany, Austria, Switzerland) region, providing our customers with simple, transparent and best-in-class products and services.”

In Italy, another solid performance by Intesa Sanpaolo made it our winner once more. The bank’s net income increased to more than €4 billion in 2018 on the back of improved margins and lower costs. Gross income was up by 11% over the previous year, operating margins increased by 4.8%, and the bank achieved a 3.6% reduction in its cost base while continuing to invest in digital innovation and new products. Proactive management of non-performing loans helped reduce the outstanding stock by nearly €16 billion, or 30%, over the year, thereby improving the bank’s overall loan book quality and contributing to a lower cost of risk. New lending to Italian households and businesses came in at roughly €50 billion over the year and the bank helped in returning some 20,000 companies to performing status. Intesa Sanpaolo’s social and cultural responsibility program is strongly focused on initiatives to reduce child poverty and provide support for people in need, whether providing free meals and medicines, authorizing forgiveness or moratoria on mortgages in certain circumstances, or providing subsidized loans.

Our winner in Portugal is again the country’s best capitalized and most profitable lender, Banco Santander Totta. During 2018 the bank increased its profit by 15%, to €500 million, on the back of efficiencies and a significant improvement in credit quality, with non-performing loans falling by 157 basis points over the year to 5.94%. The operational and technological integration of recently acquired Banco Popular Portugal was completed in October, strengthening Santander’s position as the country’s largest privately owned bank by assets and loans. The new CEO of Santander in Portugal, Pedro Castro e Almeida, says, “We will continue our commercial and digital strategy, focused on optimization of customer experience, and leading the digital transformation in Portugal, to offer a better and more-efficient service, the best products to fit customers’ needs, while continuing to help people and businesses prosper.”

The Nordic banks have long been front-runners in the digital transformation and sustainability initiatives, winning the trust of customers, while their strong profitability and capital buffers endeared them to investors. But now much of that trust has evaporated following revelations that hundreds of billions of suspect dollars passed through Danske Bank and Swedbank’s operations in the Baltic republics. It is feared this mega money-laundering scandal could spread even further, resulting in reputational damage and potentially massive fines.

However, strictly within its home Swedish market, our repeat winner Swedbank turned in another strong performance, raising its retail banking profits by 2% to SEK12.8 billion ($1.4 billion). This was largely driven by higher net interest income generated as the bank expanded its domestic mortgage business. Mortgage margins remained stable in 2018, while increased margins on deposits and corporate lending contributed to banking profitability. Swedbank accelerated its IT investments, especially the digitization and automation of everyday banking services, such as mortgages. As a result, customers in Sweden can now apply for and directly receive a loan commitment digitally, and more than half of the bank’s mortgage commitments are now fully digital.

In Demark, our winner Nordea Bank also has accelerated its digital transformation. As Erik Zingmark, head of transaction banking, explains: “Our Open Banking initiative is moving beyond PSD2 [Payment Services Directive] compliance with the launch of commercial products such as Instant Reporting. Adding Apple Pay and Google Pay alongside our other mobile payment offerings means we give our customers even more choices for making payments in their favorite way. For SMEs looking to navigate the world of trade, the blockchain-based trade finance platform allows them to increase trust and transparency when making a trade. These are just a few examples of the digital initiatives we are undertaking as we seek to better equip our corporate and personal customers in a dynamically changing world.”

The Baltic money-laundering scandal has not affected all banks in the region. Our winner in Finland, OP Financial Group, has a mutual structure and is active in insurance, savings and health care as well as domestic banking. With Finland’s economy growing strongly in 2018, the bank expanded its loan book by 6%, further strengthening its position as a provider of corporate loans. Net interest income increased by 4%, and the bank’s pre-tax earnings jumped by 28%, to €795 million. The bank also attracted 6% more in deposits during 2018 and strengthened its capital buffers, with the CET1 ratio increasing to 20.5% at year-end. Timo Ritakallio, president and group executive chairman, notes that “we launched new services that make our customers’ daily lives easier, such as the easy-to-use OP Accessible and an automatic home-loan service.” A strong promoter of financial literacy among young people, OP Financial also arranged some 800 open digital guidance events for seniors and introduced new features to its popular Money Box service that allows easy and cost-efficient investing in mutual funds with a lower initial threshold.

“The year 2018 turned out better than many had feared,” says Rune Bjerke, group chief executive of Norway’s largest lender and our pick for Best Bank in Norway this year, DNB. The bank raised its profits by 11.4% on the back of higher net interest income and lower impairments. The bank expanded its business with individuals and SMEs to offset a planned reduction in its exposure to large corporates and international customers, while the launch of the payment app Vipps brought together home-grown Norwegian and leading global financial technology. Stressing the importance of compliance, Bjerke noted that “other banks’ challenges and lack of control in the Baltic States have placed anti-money laundering high on the agenda. Compliance and anti-money laundering efforts are also highly prioritized in DNB—as they have been for many years and will be in the time ahead.”

Iceland’s leading bank, Landsbankinn, increased it market share to 38% in retail banking, improved its operating profit and accelerated its digital transformation. That led to enhanced operating efficiencies, which helped reduce the bank’s cost-income to 45.5%. CEO Lilja Björk Einarsdóttir said that “the year 2018 was characterized by many exciting innovations in digital services and it can safely be said that the bank’s services have never changed as dramatically in as short a time before. The bank’s offering of new solutions builds on a solid foundation where robust technological capability, exceptional employees, a strong market share, varied service channels and emphasis on strengthening and maintaining personal business relationships are key.”

The turnaround at Credit Suisse, our winner in Switzerland, was orchestrated by CEO Tidjane Thiam and is finally bearing fruit. Pre-tax income of CHF 3.4 billion ($3.3 billion) was up 90% against 2017 and its post-tax result of CHF 2.1 billion was the first annual post-tax profit since 2014. “Our restructuring initiated three years ago,” says Thiam, “was aimed at making the bank more resilient in challenging times by reducing risks, cutting costs and strengthening our capital base. We also wanted to grow our wealth management-related revenues and our relatively stable streams of income. We wanted to go back to profitable, compliant, quality growth. We wanted to right-size our more market-dependent activities and deal resolutely with our largest legacy issues. These objectives have broadly been achieved.” The bank’s capital base was further strengthened, its CET1 ratio standing at 12.6% at year-end.

It was a a busy 2018 for repeat winner Banque Internationale à Luxembourg (BIL), our winner in Luxembourg. CEO Hugues Delcourt says BIL’s new owners, the State of Luxembourg and Hong Kong-listed Legend Holdings, “is excellent for BIL and its clients, as it combines a strong and stable anchoring in Luxembourg and Europe with the technological and international know-how of Legend Holdings.” He adds that “regulatory changes also remained a major topic in 2018, and BIL took the entry-into-force of MiFID II [Markets in Financial Instruments Directive 2004] in January as an opportunity not only to increase investor protection in line with the regulation, but also to remodel and streamline its investment offerings to better meet its clients’ needs.”

This year’s winner in Liechtenstein is LGT. In 2018 it succeeded in stemming the outflow of assets under management and growing overall group profits by 11% while maintaining strong capital buffers. LGT is owned by the principality’s ruling family, and its CEO, Prince Maximilian von und zu Liechtenstein, noted that “after the acquisitions made in the last few years and the implementation of many infrastructure- and regulation-related projects, 2018 was a year of consolidation for us. Despite the challenging market conditions, we continued to grow and further increased profitability.” Net interest income rose by 20%, contributing to a 9% increase in operating income, and the bank’s Tier 1 capital ratio stood at 17.6% at year-end. (Under Basel III, the minimum Tier 1 capital ratio is 6%.)

Monaco’s largest local bank, CFM Indosuez Wealth, retains our award for offering a full range of banking services to residents and businesses in the principality through its six branches, as well as offering wealth management advisory and execution services to an international clientele.

Our winner in Andorra this year is Crèdit Andorrà, for making innovation and digital transformation an integral part of its business strategy as well as its strong customer-service orientation. Another factor is the balance it maintains between the bank’s leading position within the principality and further international expansion. CEO Josep Peralba Duró highlighted the bank’s commitment to corporate social responsibility through its 30-year-old foundation, Fundació Crèdit Andorrà, as “the tangible expression of our desire to contribute to people’s welfare and progress through specific initiatives in the areas of education, culture and social action.”

Malta had one of the fastest growing economies in the EU last year and this is reflected in heightened lending activity at our winner, Bank of Valletta. Net advances to customers grew by 4.5% to €4.5 billion, while customer deposits increased by 3.1% to €10.4 billion. The prevailing low interest rate environment squeezed lending margins and the bank’s cost base increased slightly as a result of continuing investment in digitization and human resources. Underlying profits were stable at €146 million, but after setting aside a litigation provision of €75 million against ongoing claims, pre-tax profits fell to €71 million. In February, Bank of Valletta’s IT system was hacked by criminals who tried to steal €13 million, prompting a shutdown of all internet access and cashpoints.

Our winner again in Cyprus is Hellenic Bank. Last year it acquired former rival Cyprus Cooperative Bank (CCB), making it the leading retail bank on the island with a 30% market share of household loans and 39% of deposits. CEO Ioannis Matsis says, “The acquisition of CCB strengthens our business model and propels the bank into consistent, healthy profitability. This enables us to focus on our mission, which is to provide an excellent service to our enlarged customer base and to continue financing the growth of the real economy.”

For Greek banks, the first priority has likewise been reducing non-performing loans and strengthening capital buffers, and on both counts our winner Eurobank Ergasias has been ahead of the curve. During 2018, its non-performing exposure (NPE) ratio fell by 550 basis points to a best-in-class 37%. Customer deposits rose sharply, especially in Greece, while a further 3.5% was shaved off operating costs, all of which helped raise the bank’s net profit to €200 million. Eurobank Ergasias is also merging with real estate giant Grivalia.“The new group will create the best capitalized bank in Greece with a total capital ratio of more than 18.5%,” says CEO Fokion Karavias. “Our leading positions in the Greek banking market in key fee-generating businesses, such as asset management, equity brokerage, private banking, insurance and transaction banking, position us well to compete in the Greek banking sector and to benefit from improved macroeconomic conditions and increased market activity in Greece.”


AndorraCredit Andorra
AustriaBAWAG Group
BelgiumBNP Paribas
CyprusHellenic Bank
DenmarkNordea Bank
FinlandOP Financial Group
FranceCredit Mutuel
GreeceEurobank Ergasias
IrelandBank of Ireland
ItalyIntesa Sanpaolo
LuxembourgBanque Internationale a Luxembourg
MaltaBank of Valletta
MonacoCFM Indosuez Wealth
NetherlandsABN Amro Bank
PortugalBanco Santander Totta
SwitzerlandCredit Suisse
UKLloyds Bank