The Benelux market is currently undergoing significant transformation. With a key focus on the Financial Services sector and fully dedicated teams specialising in Financial Due Diligence, Tax, Loan Portfolio Advisory and Risk & Regulatory services, A&M has identified key trends and measures that companies can take to optimise their businesses and stay competitive.
Overall Trends for the Financial Sector in Benelux
- The restricted monetary policy that was implemented to control inflationary pressures combined with a relatively slow repricing in the savings market has led to fairly strong NIM.
- Benelux banks have shown improved profitability due to their efforts to contain costs amidst inflationary pressures and moderately low default rates. However, increased spending on compliance and regulatory requirements has become a significant driver of operating costs. While these expenses add pressure to banks' cost structures, the overall focus on efficiency has helped to mitigate their impact.
- At the same time, non-bank lenders are increasingly gaining market shares as banks are withdrawing from areas such as consumer finance, SME lending and asset-based finance.
- The P&L insurance and investment management sectors are seeking yield to cope with the inflation, whilst on the other hand benefiting from the increased interest rates.
- The leasing sector is expected to see more transactions and consolidation as increased competition has entered the market, partially due to banks allowing more non-bank players to establish a foothold. Although banks remain active in leasing, the combination of lower expected growth, higher interest rates, and potentially rising risk costs may drive further consolidation as both banks and non-bank players adjust to the changing market dynamics.
The above trends have meant that our clients at A&M are focusing more on optimising their core business and operating models. The changing interest rate environment has also led to mergers and acquisitions (M&A).
Banks Offering More Loans for Projects That Contribute to Social Good
Enhanced Focus on Sustainable Finance and ESG increasingly forces shareholders to look for investment opportunities that generate positive social and environmental impact alongside financial returns.
Banks to Hold More Capital Against High-Risk Exposures
The upcoming Basel IV regulations will impact the capital requirements for banks, particularly concerning credit, market and operational risks. These changes will influence the types of loans banks can offer and the overall risk management strategies.
Stricter Assessments on Credit and Potential Economic Fluctuations
Regulatory bodies are imposing stricter standards on loan approvals to mitigate risks associated with financial instability
Institutions Struggle to Track Business Changes Impacting Credit Risk Lifecycle
The ECB prioritizes effective management, especially regarding credit risk. Nearly one in five deficiencies identified in the Supervisory Review and Evaluation Process (SREP) relates to credit risk management shortcomings in banks. These stem from factors such as complex financial products, internal governance weaknesses, data analysis gaps, and evolving regulations
Non-Bank Lenders Rising in SME Financing
Lending platforms that cater to a broader range of borrowers, as integration of fintech solutions is transforming the loan approval process.
M&A Surge in Balance Sheet-Based Business Models
The Benelux M&A market has seen a significant uptick in transactions in the balance sheet-based business models, such as banking and insurance underwriting which now comes on top of the continued activity in the asset-light sectors, such as insurance brokerage consolidation that has already been ongoing for an extended period of time.
Insurance Companies Consider Benelux for European Expansion
For banking, although there is uncertainty around the longer-term level of capitalisation envisaged by the supervisor, there seems to be some excess capital available for M&A and share buy-backs. In insurance, there has been an important step in consolidation triggered by the strategic refocus of AEGON and the resulting sale of AEGON's Benelux activities to ASR.1
How A&M Can Help – Our Financial Services Offerings
Risk & Regulatory
A&M's Risk and Regulatory Team offers integrated risk management support to parties active in the financial services industry with a hands-on approach and global reach. We have a proven track record of working with Risk Executives and Board of Directors in the areas of risk, finance, capital and change management, and we specialise in offering integrated full-service solutions, leveraging our strong operational heritage and expertise. Our capabilities include providing specialist advice and consulting services on topics such as:
- Regulatory capital and liquidity management
- Climate stress testing
- Governance arrangements
- Combatting financial crime
- Financial and non-financial risk management
- Interactions with supervisors such as the DNB/AFM and ECB
M&A Lead Advisory and Transaction Advisory Group
Over the past 15 years, A&M has established one of the leading globally integrated financial due diligence practices. With the growth of the practice there is also more scope for specialisation, which has resulted in the establishment of a European Financial Services focused team. This team has been one of the leading providers of diligence services and offers functional capabilities such as financial, tax, regulatory, credit, operational, IT and commercial support. More recently we also added an M&A lead advisory capability to our offering, complementing the loan advisory capability that we offer.
The Benelux team is one of the market leaders in financial services M&A, working closely with our global transaction and portfolio advisory group on many of the largest financial services transactions in the Benelux market.
Our unique offering bringing integrated teams of seasoned professionals has turned us into one of the most active deal advisors in the Benelux financial sector.
Tax
The Benelux A&M financial services Tax team consist of senior M&A, corporate & international tax, VAT and transfer pricing professionals offering to the point tax advisory services.
A&M has a global Tax practice which is rapidly expanding, with offices on all continents, and a specific subgroup focusing on financial services industry tax. Our unique global firm structure enables us to work seamlessly across borders, always bringing the right people to the table when and where needed.
The team acts as a strategic advisor to executive teams on assessing tax implications of operational and digital driven changes with the increased complexity in the tax landscape. This is driven by external factors such as Pillar II, BEFIT, EU TP Directive, PSP-CESOP and VAT developments, and internal factors such as rapidly changing business models. These changes require in-house tax teams and advisors to be more responsive and embedded with the business.
As an independent firm with an action and results driven approach, we have a unique position to provide senior advisory services free from conflicts of interest.
Portfolio Advisory Group
The Portfolio Advisory Group of A&M is a leading loan portfolio sell-side advisor that has advised on numerous loan portfolio disposals in the Benelux market over the past years. Its highly experienced team also supports on advising investors on the acquisition of loan portfolios and structuring, and arranging and executing structured credit transactions for banks and corporates. It has market leading tech and analytics capability for portfolio solutions. The PAG team has advised in transactions over EUR 5bn in the past 12 months in Benelux and is a trusted party by the buyer community
A&M's Continuing Growth
The firm is dedicated to further growing its business in the coming period, leveraging its deep expertise and strategic approach to provide exceptional value to clients. A&M's continued focus on leadership, action, and results drives its ongoing success and expansion across Europe and beyond.
Footnote
1 Source: Europawire
Originally published 3 October 2024
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