Analysis of the Main Trends in European and US Banks and Their Impact on Performance

This chapter focuses on banks in Europe and the USA, investigating how the new trends affecting banking business affect bank profitability. In order to analyse this phenomenon, we take into consideration a particular sample composed of the banks included in two relevant indexes for the period 2006–2016. We then extract the balance sheet data on these banks from the Bloomberg database. Using cluster analysis, we identify three clusters of banking groups based on the number of employees and the number of branches. Subsequently, we analyse how the two major drivers of the evolution of bank activities, that is, technological advances (digital banking) and the need to comply with increasingly stronger prudential regulation, have changed the ways banks operate and are able to be profitable.

The main results suggest that the size of banks affects bank profitability and that investments in technology and capital requirements have different effects on profitability. These findings have strategic implications for bank managers, regulators, and supervisors due to the impact of these drivers on banking business and bank profitability, and the new challenges they entail.