GLOBAL - The financial services industry has seen a US$800bn value shift from weak to strong performers in the last five years according to Oliver, Wyman & Company's Shareholder Performance Index (SPI).
The report found that good performers include specialist providers such as Charles Schwab and geographic stars such as Australia. Bad segments include Japan and the universal banking sector. While the five best performing European large-cap financial services companies in 2001 were UniCredito Italiano (Italy), The Dexia Group (Belgium), Danske Bank (Denmark), BNP Paribas (France) and Swiss Re (Switzerland).
The research looked at the largest 400 quoted financial services companies in the world, segmenting them in a matrix of five geographic locations and nine sectors. However, regardless of segment, management execution was found to be a key factor in performance as is volatility of shareholder returns.
Across different sectors, the report shows that diversified groups such as Citigroup and ING and reinsurers have enjoyed consistently high performance, with future prospects being positive for institutions that effectively manage costs and capital. At the other end of the spectrum, universal banks and property and casualty insurers have consistently under-performed.
Comparing Europe and North America the report shows that shareholder performance among the European financial services sector has outstripped that of the North American market for the first time in five years, producing an average SPI of 138, compared to 130 in the US market. Most countries in Europe were found to have above-median returns, with the exception of Sweden and the UK.
On a broader scale, Asia including Japan has suffered over the last five years. As its problems are predicted to continue the only light on the horizon for the region will come from China due to latent consumer demand and potential privatisation. Other emerging markets such as Latin America also under-performed.
Andrew Stott, managing director of Oliver, Wyman & Company, said: “Comparing some of the highest ranking institutions, such as Commonwealth Bank of Australia, Citigroup or Danske Bank, we see that each achieved its success through understanding customers better. Uniquely in financial services, the value a customer generates depends on who the customer is and risks generated after the point of sale. ”
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