In order to uncover the Jewel of Luxembourg’s banking industry, PwC Luxembourg and the ABBL, with the support of CSSF and LFF, teamed up to conduct the ABBL Corporate Banking Survey 2022. The ABBL Corporate Banking Survey was an invitation-only survey comprising an online qualitative questionnaire for CEOs and a set of quantitative questions addressed to CFOs of the banks. In addition, a series of virtual or field interviews were organised with those banks.
The survey aimed to take a closer look at the state of the corporate banking segment – considering the sheer scarcity of precedent studies in this area – in order to discover peculiar challenges and untapped opportunities. Indeed, realising this goal did not come without veritable challenges, including the lack of a standard definition of corporate banking and the blurred lines between corporate banking and other banking segments such as investment banking and retail banking. That being said, the study also proved to be truly enriching as it led to the identification of a diverse set of business models operated by corporate banks in Luxembourg.
Luxembourg's Corporate Banking sector: A strong and profitable sector
Total corporate banking revenues from survey respondents hit almost EUR 2.5bn as of end-2020. Given that our respondents represent about 80% of the entire corporate banking market in Luxembourg, we extrapolated total revenues for the entire corporate banking sector to be approximately EUR 3.0bn - 58.8% more than in 2016.
Estimated Corporate Banking Revenues 2016-2020 (EUR mn)
Having secured consistent revenue and profit growth in the past – mainly through their financing solutions, more and more banks are planning to enhance innovation within their businesses, with 81% of them prioritising it as a greater means to achieve competitive advantages than cost structuring (46%) in the coming years.
How do you plan to achieve competitive advantage?
What will be the main area of focus for your innovation strategy?*
*This is a multiple-choice question, hence, respondents are allowed to choose more than one answer
Source: ABBL Corporate Banking Survey Results
Setting out banks' transformation journey
While Corporate Banks have made significant efforts to roll out green & sustainable products and services, there is still room for improvement in other areas. At the moment, only 58% of corporate banks apply any sustainability criteria to their lending processes. EU banks account for 83% of this figure – which is not surprising given the growing sustainability momentum in the EU – while non-EU banks account for only 38%
Essential Skills/Competencies to remain competitive in Corporate Banking
Source: ABBL Corporate Banking Survey Results
Another thing that was clearly highlighted during our survey is the transformational power of technology both in terms of banks’ operations and customer engagement. Technological changes have seen an increase in bank clients’ demand for efficient and tailor-made corporate banking services that best serve their interests. According to our respondents, KYC, process efficiency, data storage privacy, and AML, are the areas that will be mainly impacted by technologies.
All those societal and technological changes have given birth to the need for a new type of Corporate Bankers, one that is not only technically skilled but also digitally savvy.
Building a bright future for Corporate Banks
Despite their immense growth prospects and a relatively clear assessment of what is needed to strongly position the sector at both regional and global levels, a number of structural challenges still hinder corporate banks in Luxembourg and pose a barrier to the country’s attractiveness to other EU and non-EU banks. Through our survey, we have been able to identify three main challenges, being the overregulation, cybersecurity threats and the availability of key skills.
Main areas of concern for Corporate Banks
Source: ABBL Corporate Banking Survey Results
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