European SMEs: Doing banking well is not so complicated
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European SMEs: Doing banking well is not so complicated

Rather than super-CEOs and messianic technology, European banks might find salvation simply in small-business lending by empowered staff. As some of the best-performing banks recognize, keeping to the basics offers good long-term returns.


Funding small business investment should be core to banking’s function in society, but for many banks these are unattractive borrowers – risky, small and idiosyncratic. As the chief executive of one of Europe’s biggest banks tells Euromoney, it is much harder to lend to the shop around the corner than to BP. So why bother?

Up to now Europe’s biggest listed banks have not bothered much with small and medium-sized enterprises, compared with the continent’s mutual and savings banks. In France, the biggest banks for SMEs are all mutual groups, according to research from Kantar TNS. In Germany, the public-sector Sparkasse have a market share in SME financing of 70%, according to Boston Consulting Group’s Centre for Public Impact. 

This poses a problem for listed lenders, which have to worry more about return on equity – especially as international competition is growing for corporate business.

Increasingly, technology brings new ways to do SME lending, using basic data to analyze the risk with algorithms and deploy funding faster. UK-based Iwoca is an example, although mainly in the micro-SME segment. 

Site visits

Yet in reality, as long as banks can afford it, there will still be an advantage in actually meeting SME owners and making site visits – and far more so than in the mortgage market.

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