European banks - job cuts are inevitable, restructuring likely to gather pace

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Europe's banks need to cut costs by a fifth and simultaneously grow revenues by 15% just to get their profitability to match their cost of capital, a study said on Monday.

Reuters reports that European banks' return on equity (RoE), a key measure of profitability, is likely to average less than half their cost of capital again this year, lagging well behind U.S. rivals as lenders struggle with high costs and weak economic growth, according to a study by consultancy EY.

That means job cuts are inevitable and restructuring is likely to gather pace this year.

EY's European Banking Barometer showed RoE is expected to improve by 1.6% this year on average, but that would only lift it to 4.4%, compared with an average cost of capital of 9.4% and average returns of 12.2% for U.S. banks.

EY surveyed 226 senior bankers in 11 markets.

To access the complete Reuters article hit the link below:

European banks' profitability gap shows big cost cuts needed

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