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Outlook for financial services EY Eurozone Autumn 2015

EY Eurozone - EY - US · landscape set to be transformed by FinTech ... by 3.8% in 2016, as the economic recovery broadens out to investment. 2016 2016 2015 2015 2014 2014 2012 2013

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Outlookfor financial services

EY Eurozone

Autumn 2015

02 | EY Eurozone forecast | Autumn 2015 Outlook for financial services

04HighlightsA more stable path for growth is finally emerging, thanks to increased consumer spending, stronger consumer demand and more robust exports. However, once the boosts felt by a weaker euro and cheaper energy prices begin to fade, recovery will likely cool.

06IntroductionAndy Baldwin, EMEIA Financial Services Leader, looks back on four years of Eurozone volatility and shares his views on our latest forecast.

08Macroeconomic and sector overviewWhat are the 2015–16 forecast highlights for the Banking & Capital Markets, Insurance and Wealth & Asset Management sectors?

Viewpoints

10Banking & Capital MarketsMarie-Laure Delarue, EMEIA Banking & Capital Markets Leader, views the pick up in lending positively but fears that low interest rates and higher costs will again prove challenging for Eurozone banks.r

12InsuranceLow interest rates and rising regulation — with Solvency II an imminent example — will continue to dominate the sector, but digitalization will be the big new challenge, says Andreas Freiling, EMEIA Insurance Leader.

14 Wealth & Asset Management Roy Stockell, EMEIA Wealth & Asset Management Leader, thinks that with concerns over the Chinese economic slowdown having been overblown, it would be prudent for the sector to no longer view emerging markets as a homogenous group.

16Outlook by country

19More information

Contents

EY Eurozone forecast | Autumn 2015 | 03Outlook for financial services

1.7%We expect consumer-spending growth of 1.7% in 2015, the strongest it has been since 2007.

1.8%Investment spending will become an increasingly important driver of recovery in 2016, with growth picking up from 1.3% in 2014 to 1.8% in 2015, and further to 2.4% in 2016.

HighlightsAfter the turbulence of 2012–13, and the stabilization of 2014, the Eurozone has enjoyed a more encouraging pace of growth through 2015. As firms respond to better exports, stronger consumer demand and increased capital spending, GDP growth should see a boost from 1.6% this year to 1.8% in 2016. But this will mark the high point of recovery; growth is then expected to ease to 1.7% in 2017 and about 1.5% in the following couple of years as the boosts from lower energy prices and a weaker euro fade.

ey.com/fseurozone

04 | EY Eurozone forecast | Autumn 2015 Outlook for financial services

11%The average unemployment rate in the Eurozone is projected to fall from 11.6% last year to 11% in 2015, and further to 10.7% in 2016.

4.8%Export growth of 4.8% is forecast for 2015, although this will edge back to 4% growth in 2016 due to weaker demand in a number of emerging economies.

1%Government spending will remain constrained for some time. During 2015–19, we expect only modest growth, of around 1% a year.

EY Eurozone forecast | Autumn 2015 | 05Outlook for financial services

“ An industry landscape set to be transformed by FinTech”Andy Baldwin EMEIA Financial Services Leader

06 | EY Eurozone forecast | Autumn 2015 Outlook for financial services

Welcome to the final edition of our Eurozone forecast: outlook for financial services. We’ve been mapping the outlook for the Eurozone FS industry for four years now — a period that’s seen unprecedented activity, volatility and change in Europe’s Financial Services landscape and some major steps to recover from the financial crisis.

The industry is now in a different place from where it was in 2011. We’ve seen the Eurozone banking sector survive a near-collapse thanks to soaring bad debts, volatility driven by the recurrent Greek crisis and a fundamental crisis of confidence in the financial system in Europe. Insurance has weathered prolonged low interest rates and low consumer spending. The Asset Management sector had to adjust to a world of safe-haven seekers and a still as-yet-unresolved savings and pensions gap across Europe.

Financial Services has experienced an unprecedented wave of regulation and fiscal policy changes aimed at stabilizing the system. Perhaps most significantly, we’ve moved away from national regulation, with the European Central Bank gaining unprecedented powers under the Single Supervisory Mechanism, as exercised in last year’s Asset Quality Review and stress test.

As the dust settles, and the Eurozone economy looks like it will experience slow but steady 1.6% GDP growth for the next couple of years, we’ve taken the view that a quarterly forecast is too frequent. Interest rates, bad debt levels and asset values are all looking fairly stable, and consumer demand for real estate, cars and decent pensions is expected to grow slowly in line with GDP. While it clearly remains important, we believe the macro-economic outlook is no longer going to be the predominant catalyst for change in the European industry.

That’s not to say we are no longer feeling the fallout from the 2008 crisis. While the Eurozone now has a better-capitalized banking system, with the benefit of hindsight, the crisis response prioritized stability, safety and risk avoidance. This meant the role that the Financial Services industry plays, as a catalyst for jobs and growth, received less attention by comparison.

The next important policy step post-crisis, which should go some way to address this overcorrection, is Lord Hill’s Capital Markets Union (CMU). A concept that was generated in the depths of the crisis, the CMU’s aim is to reduce European small and medium-sized enterprises’ (SMEs’) perceived overreliance on bank funding for investment capital. Ironically, it will now come at a time when the banking industry and its lending volumes are recovering. As a result, one of its bigger implementation challenges will be stimulating

demand and changing the behavior of SMEs to embrace new sources of capital, alongside their existing banking relationship.

In addition, regulatory responses to the crisis, combined with such low growth and interest rates, are laying the foundations for a sustained wave of transformation across the industry. Net interest margins are being squeezed. This puts smaller institutions at risk of takeover, as the larger ones look to develop new capabilities and seek benefits of scale. As the industry reshapes, the bigger and more robust players will survive, but they are now beginning a journey of transformation that will see them looking significantly different in the future. In order to address the ongoing issues around profitability, operational efficiency, customer experience, service and trust, we expect them to embrace financial technology — FinTech.

Banks will continue to drive innovation in payments, customer experience and omnichannel models by integrating web, mobile apps, phone and face-to-face, to engage and serve customers better and more responsively than ever before.

For wealth and asset management businesses, the rise of “robo-advisor” technology will change product distribution, advice and portfolio management, with increasing use of exchange-traded funds. The impact this has will be seen to varying levels in both the mass-market and in the high-net-worth segment.

Insurers will capitalize on technologies such as wearable connected devices, telematics and driverless cars to transform their offerings. While “big data” will challenge the historic notion of risk pooling, with ever more granular risk data and rating variables opening up the opportunity for innovation in product design and “community” of interest-based segmentation.

Moving forward, the increasingly pervasive nature of technology will break down the traditional boundaries between Financial Services and other industries, as new players move in from adjacent and ancillary sectors. Online retail and payments services will meld into banking. Insurance and health care will converge around wearable sensors, and comparison sites will migrate from price comparison to automated algorithm-driven apps to guide consumers’ selection of a diverse range of financial products.

As the regulatory and fiscal storm begins to subside, some might have expected that the pace of change in the Eurozone Financial Services industry would do the same. In fact, the relative stability in the macro-economy, with such low growth and returns rates, is fueling a new wave of FinTech-inspired innovation and investment, and so the real reshaping of the landscape post-crisis may be only just beginning.

Introduction

Andy Baldwin EMEIA Financial Services Leader

EY Eurozone forecast | Autumn 2015 | 07Outlook for financial services

The tide is slowly turning

Macroeconomic overview

From four years of volatility in the Eurozone…

GDP

2012:

locked

A 0.8% fall in Eurozone GDP and......a 3.9% contraction in bank lending to corporates

...to our forecast for 2016

Of 1.8% GDP growth and......a 3.8% expansion in corporate loans

GDP

A more stable growth path has emerged, thanks to…

gg Good policymaking

gg Signs of improvement in labor markets

gg Low oil prices

gg The low euro and robust demand in export markets, notably the UK and the US

Corporate lending is climbing… slowly

gg Credit conditions have improved and business confidence has grown.

gg Worries over events in Greece may have delayed a stronger recovery throughout the Eurozone until 2016…

gg …when we expect to see corporate lending expand by 3.8%, after contracting by 1.7% in 2014, as the economic recovery broadens out to investment spending.

now hiring

?

contract

08 | EY Eurozone forecast | Autumn 2015 Outlook for financial services

Insurers are facing slightly brighter operating conditions

Over the medium term, an aging population should buoy demand for retirement and savings products, and we expect sales of homes and cars to rise.

On the back of higher demand for insurance policies, premium income for life insurers should continue to recover in 2015, and non-life insurers can expect a slight acceleration of growth in premium income.

16.8%

+

2014

9.7%

+

2015

Emerging-market risk has caused concern among asset managers

This summer’s market volatility has dented the outlook for growth in assets under management (AUM). Equity portfolios have been hit hard by valuation changes in recent months…

…but our forecast for 2015 is still for strong growth of 9.7% – albeit lower than the 16.8% surge seen last year.

Insurance premium income¢ Non-life ¢ Life

2014 2015

2015 20162014

3.1%2.4%

1.4%

2015

AUM

EY Eurozone forecast | Autumn 2015 | 09Outlook for financial services

The pick up in lending is positive but sporadic Net loan growth expansion is a good sign for Eurozone banks, but the pick up is not being felt unilaterally. What’s more, low interest rates and structurally higher costs post-crisis mean banks are not out of the woods yet.

3.3%

+3.1%+1.9%-1.8%

3.8% <20%

Banking & Capital Markets

Bank assets will grow at an average of 3.3% during 2015–19, exceeding their 2011 peak in 2017.

After contracting by 1.7% in 2014 (the third consecutive year of contraction), we forecast that the stock of corporate loans in the Eurozone will stabilize this year before expanding by 3.8% in 2016, as the economic recovery broadens out to investment.

2016

2016

2015

2015

2014

2014

20132012

The consumer recovery in the Eurozone is strengthening and feeding into higher demand for loans. After contracting by 1.8% last year, we expect a 1.9% expansion in consumer credit in 2015 and growth of 3.1% in 2016.

Less than 20% of the global IT spend is going into new investment in IT.

10 | EY Eurozone forecast | Autumn 2015 Outlook for financial services

Marie-Laure DelarueEMEIA Banking & Capital Markets Leader

In Q3, €530b was wiped off Eurozone equity market capitalization. However, our economic outlook highlights how easing credit conditions and a return to growth in new lending to non-financial businesses are positive for the Eurozone economy — enhanced still further by the prospect of net loan growth rising for the first time this year. The pace of the pick up in lending varies sharply between different countries though. And looking across Europe as a whole, the recovery is still not embedded, with overall EU GDP only set to return to pre-crisis levels this year.

Add in the fact that there is still no sign of monetary tightening, and it becomes clear that there is little scope for European banks to grow their revenues significantly. Moreover, even if Eurozone interest rates did rise faster than expected, this would not necessarily translate directly into revenue growth for banks.

Higher structural costsThis situation is made more problematic by the fact that banks’ costs are structurally higher than they were pre-crisis. Given that the overall revenue pool in Europe is not really growing, banks must do more to optimize their business, as well as seek out new and innovative ways to grow revenues by increasing their share of wallet.

These goals demand that they differentiate themselves more clearly in the marketplace, and find new ways to drive efficiency. To do this, a growing number of banks are seeking to harness the power of FinTech in their business, operating and customer engagement models, and their approach is changing. To date, banks’ efforts to develop digital capabilities and offerings in-house — as well as their ability to monetize them — have achieved only patchy success. They have been hampered by an inability to create and sustain a culture of entrepreneurialism and innovation internally.

Partnering to create new products and servicesThis is driving banks to look increasingly at partnering with each other and with FinTech developers to create new digital products and services. Some are also setting up FinTech accelerator programs to pinpoint the best opportunities to harness new digital technologies across the business. However, they still face a challenge to integrate disruptive innovations within their existing systems and processes.

Success in applying FinTech into traditional banking models will be central to their ability to respond to the pressures of today’s macro environment — namely, low interest rates, sluggish growth and intensifying regulation — and to compete with innovative, agile, technology-driven competitors.

Viewpoint

“ Banks must do more to optimize their business, as well as seek out new and innovative ways to grow revenues.”

EY Eurozone forecast | Autumn 2015 | 11Outlook for financial services

Digitalization looks set to reshape the sectorWhile regulation and low interest rates will remain challenging, insurers should watch out for new digital entrants and adapt to avoid them being a threat.

Insurance

2.6% €617bWe expect growth in non-life premiums to remain modest this year at around 1.5%, with growth picking up modestly to 2.6% in 2016.

Life gross premiums are still expected to rise above their 2008 peak of €617b for the first time in 2015, and modest growth in coming years will follow.

2014 2015

2016

3.5%

-0.9%

-3.7%

Pressures on insurance company earnings resulted in a 3.7% decline in profits last year, and we expect a further 0.9% decline in 2015. Positive, albeit modest, growth of 3.5% in 2016 is forecast alongside the improving economic and financial outlook.

3.1%

Growth in premium income for life insurers

in the Eurozone is expected to moderate to

3.1% in 2015.

12 | EY Eurozone forecast | Autumn 2015 Outlook for financial services

Andreas Freiling EMEIA Insurance Leader

In our spring forecast, we highlighted the challenges that Eurozone insurers are facing from low interest rates to rising regulation — and both of these continue to apply.

With the low interest rate environment set to persist for the next two or three years, investment yields will remain limited, especially given that 70% to 80% of continental European investments are in bonds. At the same time, insurers in some countries are facing a need to pay high, guaranteed bonuses to policyholders, putting further strains on their already depleted reserves.

On the regulatory front, the January 2016 start date for Solvency II is now imminent, with most insurers having completed their preparations. However, the next challenges are looming, in the shape of International Financial Reporting Standards (IFRS) 4 and IFRS 9. A significant change made this September was the International Accounting Standards Board’s decision to allow insurers to opt to hold off from applying IFRS 9, until after the implementation of IFRS 4 Phase II. With this not scheduled to happen until 2020 at the earliest, the change provides insurers with a breathing space, but the prospect of the new standards continues to hang over the industry.

Regulations to drive changes in behaviorA further development this summer was the publication of the final compromise text of the EU’s Insurance Distribution Directive (IDD). This has now been ratified by the EU, confirming the expansion in the focus of industry regulation from prudential, risk-based measures toward policyholder protection and conduct. The IDD will change companies’ behavior by applying new rules around sales situations to ensure customers are protected through the contract term. This is likely to reinforce the trend we have previously observed in our forecasts for both life and non-life companies to re-examine how they go to market and use customer data.

The topic of data leads us neatly to the growing impact of new technologies in insurance. Technology is opening up the potential to disaggregate the insurance value chain, and allocate processes such as payments, claims and even underwriting to different providers, thus effectively reducing the insurance company’s role to the core risk area.

Existential threats to the industryIt is anticipated that the current low interest rate environment could spell the end of life insurance. However, the business model has proven its longevity and resilience through many cycles and it will survive this one. A bigger, non-cyclical threat is digitalization, because the resulting price transparency has the potential to undermine sustainable customer relationships and commoditize insurance. A related shift is that insurers will increasingly find they are no longer competing just with each other, but with entrants such as Google, telcos and Amazon. If insurers are watching out for existential threats to their industry, that’s where they should look.

Viewpoint

“ The life insurance business model has proven its longevity and resilience through many cycles and it will survive this one — a bigger, non-cyclical threat is digitalization.”

EY Eurozone forecast | Autumn 2015 | 13Outlook for financial services

Emerging market volatility has unsettled the sectorWhile China’s economic slowdown has been overblown, asset managers have been rocked by poor emerging-market performance elsewhere.

Wealth & Asset Management

Multi-asset strategies remain a key driver of inflows into Eurozone funds, with growth of 23.2% in AUM in 2015.

Fund of funds are forecast to have €670b under management by 2019, a 55% increase from 2014.

AUM in the Eurozone are set to rise by a healthy 9.7% in 2015. Growth in future years will be more subdued, forecast to average 3.1% a year over 2017-19.

9.7%Growth in bond funds is likely to fall sharply from 18.7% in 2014 to 5.9% in 2015.

5.9%

23.2% €670b

14 | EY Eurozone forecast | Autumn 2015 Outlook for financial services

Roy Stockell EMEIA Wealth & Asset Management Leader

While some observers have interpreted the volatility and equity price declines over the summer as the first signs of a renewed crisis in global markets, the reality is much less dramatic. What is happening is more a process of correction and rebalancing than a slide back toward 2008-style turmoil.

While the stock market gyrations in China have grabbed global headlines, the fact remains that China’s markets are still ahead of where they were at the start of the year. And the devaluation of its currency was something China had wanted to do for some time, with the falls in stock prices providing the opportunity for the move, rather than being the root cause.

An overdue correctionMeanwhile, the correction in European markets is exactly that — a correction that was overdue. Going forward, continuing low interest rates in the Eurozone are likely to see an ongoing move from cash back into the markets in search of returns, reflecting a growing awareness that leaving assets in cash is not the route to long-term wealth creation.

However, concerns remain — not least around future liquidity, as more illiquid investments become the best option for higher yields. In addition to property, other relatively illiquid investments, such as infrastructure and credit, are coming increasingly into play. Long-term infrastructure projects offer good yields but are illiquid over the project term; and credit is an evolving asset class that can drift into the shadow banking space, with asset managers often regarded as an easier source of credit than banks. Meanwhile, the continued importance of multi-asset strategies in Eurozone fund inflows reflects the desire to spread risk across different asset classes.

Volatility in emerging marketsLooking more widely across the world, one of the biggest disappointments of the current environment has been the heightened volatility and relatively poor performance of emerging markets — a factor that means the shift of assets from cash back into the markets is focusing mainly on mature markets. With the concerns over China being overplayed, it is increasingly evident that viewing the emerging markets as a homogenous group is an approach that is no longer fit for purpose. While the European emerging markets have not performed as well as hoped, some Asian markets are still powering ahead.

In the long run, the question may be whether China should still be designated as “emerging.” It is certainly hard to think of any other emerging market where a burst of volatility would have had such profound impacts on other markets around the world.

Viewpoint

“ Viewing the emerging markets as a homogenous group is an approach that is no longer fit for purpose.”

EY Eurozone forecast | Autumn 2015 | 15Outlook for financial services

Germany

The German banking sector appears relatively robust and well placed to respond to the expected pick up in loan demand this year, as the economic recovery gathers momentum. We expect business loans to rise by 1.6% in 2015, with growth picking up to 4.4% in 2016. Total loans will therefore reach €1,370b by the end of 2016.

There is growing pressure for smaller banks to consolidate in order to improve profitability. This process will also help to reinforce the downward trend in the aggregate loan-to-deposit ratio.

Germany’s life insurance sector continues to struggle, due to the predominance of guaranteed long-term policies that are difficult to sustain in the current low interest rate environment. A BaFin stress test* has pointed to potential solvency risks in the sector and the International Monetary Fund has warned in its latest Global Financial Stability Report of the “high and rising interconnectedness” with the financial system due to investment and liquidity links with banks.

The gradual rise in interest rates that we are forecasting over the next few years suggests that the sector’s problems will not disappear any time soon. Our projections for profits across the German insurance sector envisage profits declining until 2017.

Robust growth in German AUM of 9.4% in 2014 was helped by the strong performance of equity markets last year. Inflows have remained strong and we expect further growth of 7.4% in 2015. By 2019, we anticipate that AUM will have reached €791b.

Future growth in AUM is likely to be focused on multi-asset funds, equity funds and fund of funds, compared with more defensive bond funds. We expect the share of bond funds in total AUM to decline from 22% in 2014 to 17% by 2019.

Outlook by country

Sector

Banking & Capital Markets

Insurance

Wealth & Asset Management

*BaFin is the German Federal Financial Supervisory Authority

16 | EY Eurozone forecast | Autumn 2015 Outlook for financial services

France Italy

Expectations for growth in corporate loans have been revised down to just 0.8% for 2015 (from 2.0% previously), as recent data indicates that the economic recovery has yet to broaden and remains strongly dependent on the external environment.

Moreover, the latest lending survey from the Banque de France indicates that demand for loans from the non-financial corporate sector has fallen back again. This may renew sluggishness in economic growth, as indicated by recent activity indicators such as the Purchasing Managers’ Index. With business sentiment still robust, we expect this will only be a temporary pause in activity. We therefore forecast that growth in corporate loans will pick up to 3.6% in 2016, in line with the projected upturn in business investment.

Premium income for life insurers is likely to remain subdued due to the weak economic backdrop, with growth forecast to average 3% a year over the next four years. Disintermediation of life and pensions is putting pressure on the industry to find new ways of encouraging loyalty and providing new services to meet customer needs.

We expect non-life premium growth to average just over 2% a year over the next four years, lagging behind the Eurozone average of 3% annual growth. Growth in French premiums will be dampened by the weak domestic economy and subdued housing market.

Growth of just 1% in French AUM last year lagged well behind the robust 16.8% expansion in AUM across the wider Eurozone. This subdued performance reflects the heavy French focus on money market funds, which accounted for 43% of AUM in 2014.

However, with investors rotating toward equity and mixed-fund strategies, we expect growth in AUM to pick up in future years. Our projections indicate that French AUM will reach €767b by 2019, by which time the share of money market funds will have fallen to 36%.

Non-performing loans in Italy are significantly higher than in the other large Eurozone economies and they continue to rise. The Government has announced reforms, including a change in the tax regime for loan losses (to allow full deduction for tax purposes in the year the loan loss provisions are taken), changes to the insolvency law (which should boost recovery values by shortening the time required to enforce on collateral) and the forced conversion of the “popolari” banks into joint stock companies. The latter should encourage consolidation in the sector.

These measures will be helpful, but we still believe the creation of a bad bank will be necessary to strengthen bank balance sheets.

Demand for new cars appears to be recovering, with new car registrations in the first half of 2015 showing a 15% increase compared with the same period last year. This is encouraging for the non-life industry, as motor insurance represents more than half of this business. With the Italian economy picking up, we expect growth in non-life premiums to recover gradually from 0.4% in 2015 to 1.6% in 2016, and further to 2.6% in 2017.

Growth in life insurance premiums is expected to moderate to 3.2% this year, following the strong rebound in the single premium business seen in 2013–14.

Building on the strong 21% expansion in 2014, we expect further robust growth of 10.2% in total AUM in 2015. Bond funds performed well last year but, with yields at such low levels, it is likely that investors will look at alternative asset classes in the future.

Against this background, we forecast that AUM in bonds will be 2% lower in 2019, compared with their 2014 level, which contrasts with strong growth in equity funds (+30%) and mixed-asset funds (+73%) over this period.

EY Eurozone forecast | Autumn 2015 | 17Outlook for financial services

Netherlands SpainSector

The Dutch loan-to-deposit ratio of 118% in 2014 was significantly higher than the Eurozone average, suggesting that the sector is more highly leveraged than many of its peers. The Dutch central bank has recently called for a reduction in tax incentives that favor the growth of the sector, as well as the entry of more foreign banks to promote increased competition. We expect this to translate into a medium-term trend toward lower loan-to-deposit ratios in the sector.

Corporate loans picked up last year with the rebound in investment. With loan growth proving solid in the first half of 2015, we forecast corporate loans to expand by 4.1% by the year-end, with growth averaging a similar rate in 2016–17.

Life premium income contracted in 2014 for the third consecutive year, but we expect a return to positive growth of 3.7% in 2015, supported by the brightening economic environment. Growth in non-life premiums is also expected to pick up to 2.1% this year, after expanding by a modest 1.3% in 2014.

Insurers are reconsidering their distribution models in the face of a slump in products sold through banks, as banks increasingly distribute their own savings products. Life insurers and pension providers are examining other routes to market beyond the traditional broker channel, with growth in online platforms.

Dutch AUM witnessed strong growth in 2014, supported by robust growth in equity markets and the decline in government bond yields to record lows. We expect further strong growth in 2015 to push total AUM to €81b by the end of the year.

In common with other jurisdictions, some rotation from bonds to equities is expected in the years ahead. The share of AUM in bond funds is therefore projected to decline from 26% in 2014 to 19% by 2019.

New lending to the non-financial corporate sector in Spain has increased strongly in recent months. Flows are likely to remain positive in the coming quarters, reflecting the improved economic backdrop and more positive bank sentiment, as well as supportive European Central Bank actions, such as quantitative easing and targeted longer term refinancing operations.

Although we expect deleveraging to lead to a further 3.1% contraction in the stock of loans this year, we think corporate loans could enjoy a strong rebound next year. We therefore forecast positive growth for 2016 of 4.9%.

Demand for life insurance products remains depressed as households focus on reducing their high debt levels. We forecast life premiums to shrink by 0.5% in 2015, with a return to positive growth of 2.0% in 2016. Even at the end of the forecast period in 2019, life premiums will still be 14% below their 2009 peak.

The non-life insurance sector is also facing difficult conditions. For example, despite the recent upturn in new car registrations, they were still around 35% lower in the first half of 2015 than at their pre-crisis peak. We forecast growth in non-life premiums to pick up only modestly to 1.3% in 2015 and 3.2% in 2016.

Total AUM in the Spanish market witnessed another exceptional year of growth in 2014, aided by particularly strong gains in funds of funds and mixed-asset strategies.

Although we do not expect the surge in growth of 2013–14 to continue, we anticipate continued solid growth to push total AUM above its pre-crisis peak of €214b by 2019. Mixed-asset strategies are expected to continue their strong gains, pushing their share of total AUM from 16% in 2015 to 23% by 2019.

Banking & Capital Markets

Insurance

Wealth & Asset Management

Outlook by country

18 | EY Eurozone forecast | Autumn 2015 Outlook for financial services

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