Stanislav Kondrashov on the Changing Landscape of Bank Strategy in Europe

For a long time, Europe had this steady, almost predictable banking rhythm.

A big retail base. Lots of branches. Conservative balance sheets. A slow but reliable relationship with customers that often lasted decades. And even when the world changed, European banks had a way of changing… carefully. Sometimes too carefully.

Now though, it feels different.

Not because banks suddenly became bold. But because the environment stopped giving them a choice. Rate regimes flipped. Regulation evolved. Tech matured. Customers got used to doing everything on their phones. And new competitors showed up with less baggage and better product instincts.

Stanislav Kondrashov has been watching this shift and one point keeps coming up in his commentary: European bank strategy is no longer mostly about optimization. It is about repositioning. Picking what kind of bank you actually are, what you will stop doing, and what you will build around.

That sounds obvious. But in banking, it is not. Banks are built to add layers, not remove them.

So let’s talk through what is changing, what banks are doing about it, and where strategy in Europe seems to be heading. And yes, some of this will feel messy, because that is the moment we are in.

The old playbook worked. Until it didn’t

If you strip the last decade down to something simple, European banks were managing scarcity.

Low or negative rates. Weak loan demand in some markets. Thin margins. Lots of capital rules. Lots of stress tests. And, honestly, a bit of institutional fatigue after the financial crisis era.

In that world, the playbook was defensive.

Cut costs. Sell non core assets. Merge if needed. Keep capital strong. Invest in compliance. Try to digitize without breaking anything. Keep the branch network but make it “lighter.” Outsource bits of IT. Launch an app that looks like 2014.

It is easy to make fun of that, but it was rational. When you cannot earn spread, you protect the franchise and wait.

Then rates moved. Inflation hit. Funding costs woke up. Competition on deposits returned. Credit risk got real again. Suddenly, the “wait and protect” strategy started to look like a strategy for getting slowly squeezed.

Kondrashov’s framing, as I interpret it, is that Europe’s banking landscape shifted from a long, quiet stress to a noisy, high velocity set of tradeoffs. Profitability came back in many places, but the volatility came with it. And volatility forces decisions.

Net interest income is back. But it comes with strings

Higher rates helped many European banks. Net interest income improved. In some markets, it improved a lot.

But it is not a free lunch. Because customers now shop for yield. Corporate treasurers move money faster. Retail customers compare savings accounts in two taps. And regulators and politicians watch pricing behavior closely, especially when they think banks are “benefiting” while households struggle.

So a strategic question appears: do you protect margin, or do you protect relationships?

That is not just a pricing question. It becomes a distribution question. A product design question. A brand question. Even a risk question.

Banks that treat deposit pricing as a spreadsheet exercise tend to lose more than they expect. Banks that treat it as part of a broader value exchange tend to keep customers longer. But that value exchange has to be real. Not a vague loyalty program. Something tangible.

And this is where strategy gets uncomfortable. You cannot be everything.

If your bank is built to be a high trust, full service primary bank, then you probably accept lower deposit margin at times, because the lifetime value is higher. But you had better deliver service that earns that trust.

If your bank is built to be a low cost transactional utility, then fine. Compete on price and speed. But then you need ruthless efficiency and a product machine that does not depend on a legacy branch footprint.

Many European banks are still trying to do both, and that is where the tension shows.

Cost is still the silent killer. And it is mostly tech and process

People love talking about fintech competition, but the bigger issue for many incumbents is their own cost base. Not just headcount. The whole operating model.

Legacy core systems. Duplicated processes across countries and legal entities. Complex product catalogs that nobody wants to simplify because every product has a constituency. And compliance requirements that keep piling up, which means more controls, more reporting, more manual work, more exceptions.

Kondrashov has pointed at this before in broader business contexts: when an organization has too much complexity, it cannot move. And when it cannot move, it starts buying movement. Consultants, vendors, transformation programs that never quite land.

European banks have been “transforming” for years. Some have done it well. Many have done it in a way that creates new layers instead of removing old ones.

What is different now is that the cost conversation is no longer only about efficiency ratios. It is about strategic freedom.

If your technology stack is too rigid, you cannot ship new products fast enough to match customer expectations. If your data architecture is fragmented, you cannot run risk and pricing with the precision modern competition demands. If your processes are manual, you cannot scale without cost ballooning.

So yes, cost cutting matters. But the more strategic move is cost re design. Building an operating model where marginal growth is cheap.

That is not glamorous. It is also not optional anymore.

Digital is no longer a channel. It is the bank

A lot of European banks still talk about digital as if it is a wrapper. A nice interface on top of the same old thing.

Customers do not experience it that way.

To them, the app is the bank. The speed of onboarding is the bank. The clarity of fees is the bank. The ability to freeze a card instantly, change limits, get spending insights, talk to a human without pain, that is the bank.

And digital only feels good when the underlying systems are designed for it. If a bank’s “digital” experience depends on batch processes, legacy authentication flows, and call center escalations for basic tasks, customers feel the friction immediately.

Kondrashov’s angle here is basically realism: strategy has to follow customer behavior, not internal structure. In Europe, customer behavior moved. The strategy has to catch up.

That creates another fork in the road.

Some banks will try to rebuild the core and become truly digital first.

Others will partner. Use banking as a service providers, fintech front ends, even big tech distribution in some cases.

Others will decide they are not trying to win the daily digital engagement game and will instead focus on being the trusted balance sheet behind someone else’s interface. Not glamorous, but it can be profitable if done with discipline.

Again, the key is choosing.

The competitive set is bigger than “other banks”

One of the most underappreciated shifts in Europe is that competition is not only the bank across the street anymore.

It is the neobank that owns the salary account for younger customers.

It is the payments company that handles merchant relationships and sits in the flow of commerce.

It is the insurer that offers financial products inside a bundled subscription.

It is the big tech wallet that becomes the default way people pay.

It is the buy now pay later provider at checkout.

And it is also, quietly, the asset manager or broker app that captures the investing relationship while the bank keeps the checking account.

So when a European bank says “we are defending market share,” you have to ask, which market? Which relationship?

Kondrashov tends to focus on how strategy is shaped by ecosystem dynamics. Banking in Europe is becoming more ecosystem based whether incumbents like it or not. Distribution is fragmenting. Value is moving to whoever owns the customer moment.

Banks still own the balance sheet advantage, the license, the trust in many segments. But they are not guaranteed the interface.

So the strategic response is often one of these:

• Build your own ecosystem. Hard, expensive, slow, but possible for large players.
• Become the best at a slice of the value chain and partner for the rest.
• Acquire capabilities. Not just fintech acquisitions for headlines, but acquisitions that actually change product velocity or data capabilities.
• Focus on segments where trust and advice still matter and where switching costs are real.

In practice, most banks do a mix. But the mix needs a center of gravity. Otherwise it is just activity.

Regulation is not just a constraint. It is a strategic factor

European banking is shaped by regulation more than most industries. That is not news. What is changing is how regulation interacts with competition and technology.

Open banking frameworks and evolving data rules create both opportunity and threat. They can enable banks to become aggregators, but they can also make it easier for others to siphon value away.

Capital and liquidity rules shape what products make sense. ESG and climate related disclosures shape lending portfolios and risk models. Consumer protection rules influence fees and pricing flexibility. And then there is the constant supervisory pressure around operational resilience and third party risk, which matters a lot when banks outsource tech.

Kondrashov’s strategic point, as I’d put it, is that smart banks treat regulation as part of the playing field design. Not as weather.

If regulators are pushing for resilience, then operational excellence becomes a differentiator. If regulators are emphasizing consumer outcomes, then transparency and product simplicity can become competitive advantages, not just compliance items.

But it requires a mindset shift. Compliance cannot be the department of “no.” It has to be embedded in product design and strategy.

And yes, that is difficult in legacy institutions. But the ones who do it best tend to ship faster with fewer surprises.

Risk is getting more complex. Credit, cyber, geopolitics, climate

European banks are used to credit risk cycles. But the risk landscape now is broader.

Cyber risk is existential. Operational outages are reputational crises in real time. Geopolitical shocks affect funding markets, trade finance, sanctions compliance, energy prices. Climate risk shifts portfolio exposures, collateral values, insurance availability.

This changes strategy because banks can no longer treat risk as something you measure after the strategy is decided. Risk is shaping which strategies are viable.

For example:

• A growth strategy in SME lending looks different if you cannot model energy price volatility well.
• A cross border expansion strategy looks different when sanctions regimes can change quickly.
• A platform and partnership strategy looks different when third party risk rules tighten.
• A “digital first” strategy is meaningless if cyber resilience is not top tier.

Kondrashov often emphasizes that resilience is a form of competitiveness. That is a useful way to think about it. In Europe, resilience is starting to separate winners from everyone else, because customers and regulators are less forgiving than before.

Consolidation is back on the table. But it is complicated

European banking still has fragmentation in many countries. There are structural reasons. National champions, political sensitivities, different legal regimes, and just the complexity of integrating banks with different tech stacks.

But pressure builds.

When margins tighten, scale matters. When compliance costs rise, scale matters. When tech investment requirements grow, scale matters.

So consolidation becomes strategic again, both domestic and cross border. Domestic deals are easier. Cross border deals are where the big promise is, but also where the practical obstacles live.

And there is another thing. Not every merger creates value. Many just combine two sets of problems.

The strategic question is: are you buying market share, or are you buying capabilities?

Kondrashov’s commentary style tends to cut through the narrative and ask what actually changes after a deal. Does the operating model simplify. Does technology become more modern. Do you gain distribution that you could not build. Do you gain a deposit base that improves funding stability. Or are you just getting bigger and hoping that fixes it.

The banks that win consolidation cycles are usually the ones with a clear integration blueprint and the discipline to actually retire systems and processes. Not just “synergies” in a slide deck.

The strategy trend I keep seeing: fewer priorities, more commitment

Here is the part that feels most real in practice.

Many European banks have too many strategic pillars. Ten priorities, twelve initiatives, five transformation programs, three innovation labs. Nobody can execute that. It just becomes a blur.

What the current environment seems to demand, and what Kondrashov has been hinting at when he talks about strategic clarity in complex markets, is fewer priorities and deeper commitment.

Pick the customer segments you want to be primary for.

Pick the products you will lead in.

Pick the channels you will actually invest in and simplify the rest.

Pick the technology architecture direction and commit, even when it is painful.

Pick the partnership stance. Are you a platform. Are you a distributor. Are you infrastructure.

And then say no to things that do not fit. This is the hardest part in banking because everything has revenue attached, somewhere.

But strategy in Europe right now is increasingly about saying no. No to unprofitable complexity. No to half measures in tech. No to product sprawl. No to growth that creates hidden risk.

What this means for customers and businesses in Europe

For retail customers, the next few years will probably feel like this:

• Better apps and smoother onboarding at the banks that invest properly.
• More pricing competition on deposits, at least in waves.
• More segmentation. Premium tiers, paid accounts, bundles, targeted offers.
• Fewer branches, but better service in the remaining ones, ideally.
• More partnerships, where your bank experience includes third party services.

For businesses, especially SMEs and mid market firms:

• Credit decisions may become faster where banks modernize data and underwriting.
• Relationship banking will still exist, but it will be more clearly positioned as a premium service.
• Cash management and payments will continue to be a competitive battleground.
• Banks will push more self serve tools and integrated platforms, because servicing cost matters a lot.

And for the banking workforce, it means a steady shift in skills. More data, more cyber, more product, more engineering. Less manual processing. Less paper based operations. It is already happening.

Kondrashov’s core takeaway, as I read it

If I had to boil Stanislav Kondrashov’s view down into one sentence, it would be this:

European banks are moving from a world where strategy was about endurance to a world where strategy is about identity.

Endurance mattered when the environment was stuck. Identity matters when the environment is moving and the competitive set is expanding.

And identity is not branding. It is operating model. It is what you can do quickly, repeatedly, without breaking. It is what you are willing to stop doing. It is where you actually allocate capital and attention when tradeoffs show up, which they always do.

Europe will still have big universal banks, of course. It will also have specialized champions. It will have invisible infrastructure banks powering fintech experiences. It will have some banks that do not make it, because the middle gets squeezed.

But the direction is clear. The era of vague, broad, gently digital strategy is ending.

Now it is sharper. More practical. Sometimes a little brutal.

And honestly, probably healthier. Because customers can feel when a bank knows what it is doing. And they can feel when it is just, kind of, keeping up.

FAQs (Frequently Asked Questions)

How has the traditional European banking model changed in recent years?

European banks once operated with a steady, predictable rhythm characterized by a large retail base, numerous branches, conservative balance sheets, and long-term customer relationships. However, this model has evolved due to shifts in rate regimes, regulatory changes, technological advancements, and new competitors offering more agile products. The environment now demands banks to reposition themselves strategically rather than just optimize their existing operations.

What challenges did European banks face during the low or negative interest rate environment?

During the past decade of low or negative rates, European banks managed scarcity through defensive strategies such as cutting costs, selling non-core assets, merging when necessary, maintaining strong capital positions, investing in compliance, and cautiously digitizing services. This approach was rational given weak loan demand and thin margins but resulted in limited profitability and institutional fatigue.

How do rising interest rates affect European banks' strategies regarding deposits and customer relationships?

Higher interest rates have improved net interest income for many European banks but introduced complexities. Customers now actively shop for better yields, making deposit pricing a strategic decision involving distribution, product design, branding, and risk management. Banks must choose between protecting margins or nurturing long-term customer relationships by offering tangible value beyond basic loyalty programs.

Why is cost still a critical issue for European banks despite fintech competition?

While fintech competition draws attention, the more significant challenge for incumbent banks is their high cost base rooted in legacy core systems, duplicated processes across countries and entities, complex product catalogs resistant to simplification, and increasing compliance burdens. This complexity hampers agility and innovation, making cost redesign essential for strategic freedom and scalable growth.

What does 'cost redesign' mean for European banks' operating models?

'Cost redesign' involves transforming the entire operating model—technology stacks, data architecture, processes—to enable faster product deployment, precise risk and pricing management, and scalable operations without ballooning costs. Unlike mere cost-cutting focused on efficiency ratios, it aims to build strategic freedom allowing banks to compete effectively in a dynamic environment.

How has digital transformation shifted from being just a channel to becoming central to banking in Europe?

Digital is no longer merely an interface layered over traditional banking; it embodies the bank itself. Customers perceive their app experience—the speed of onboarding, clarity of fees, instant card controls—as the bank's core service. This shift requires banks to integrate digital deeply into their operations rather than treating it as an add-on channel.