European Banks to See Consolidation, KPMG Study Says

The European banking industry is likely to consolidate as medium-sized lenders shrink and focus on their home markets, according to a study by accounting firm KPMG International.

The potential change will come as banks are “pulled in many directions at once” by capital and liquidity regulations and corporate governance and compensation rules, KPMG said in the report today.

“Europe’s banking industry is likely to see significant consolidation, with the second tier likely to shrink in both breadth and number,” said Jeremy Anderson, global chairman of KPMG financial-services practices in London. “The main brand names will continue in the market, but with fewer challenger banks emerging than might have been expected.”

European banks are already selling assets to prepare for tougher capital rules under Basel III international standards and slower revenue amid the sovereign debt crisis. Rabobank Groep, the Dutch lender, agreed yesterday to sell a controlling stake in its asset-management unit for 1.94 billion euros ($2.59 billion) as it sheds units to help strengthen its finances amid slowing asset growth and competition for deposits in the Netherlands.

“Even the regulators are now worried about the volume of regulation,” KPMG said in its report.

To contact the reporter on this story: Ambereen Choudhury in London achoudhury@bloomberg.net

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net