Overall optimism among banks in Europe has dropped to its lowest level since 2012, a period considered to be the peak of Eurozone debt crisis, according to a survey by EY.
Only 52% of the respondents anticipated industry performance to improve in the coming year, which is a fall from 56% in the prior year.
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"The outlook amongst UK banks, in line with a growing European-wide pessimism about the sector, has fallen over the last year as risk, regulation and cost cutting dominate the agenda," the study stated.
However, 83% of UK bankers have forecast growth in debt and equity market issuance in 2016. Bankers across the UK have also anticipated increase in capital markets activity.
Also, corporate and retail banking are expected to have an improved outlook in 2016, with 68% and 67% of respondents respectively rating their outlook as good or fairly good, the study revealed.
In Europe, bankers anticipate lending policies to the majority of sectors to become less restrictive over the course of 2016, mainly due to banks’ stronger capital positions and ongoing monetary easing by the European Central Bank.
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By GlobalDataFurther, 47% of UK bankers have said that they expect to see sales of assets, with 32% expecting that the assets will be purchased, and 21% expecting to see joint ventures across the market.
Also, 23% of respondents believed that collaboration with fintech will be significant for their institution.
Managing reputational risk remained the top priority for UK banks, with over 90% of UK bankers citing the same.
The study also revealed European banks placing greater priority on cybersecurity, with 56% citing it as important compared to 48% last year. Cybersecurity also remained a major concern for over 75% of UK bankers.
Also, 56% of UK bankers predicted headcount reduction to occur, a rise from 34% a year ago.
Banks across Europe predicted ongoing moderation of pay, due to weak business performance, regulatory and shareholder pressure.
EY global banking & capital markets lead analyst Karl Meekings said: "It is clear that banking in Europe remain in a state of adjustment, as regulatory and economic developments continue to take their toll. The UK is an exception, given the more positive outlook in that market, but pressure continues to be evident even in the UK market, especially in terms of remuneration and reputation."
