In the 1990s the rebound in bank profitability came about principally through an expansion of income, with only modest interventions on costs (Figure 8).5 In the present circumstances, an increase in revenues appears unlikely considering the stagnation in lending, narrow profit margins, the downward trend of asset management and the penalization of trading activity implicit in the new capital rules.
Overall, the Italian banking system seems to have an excess of capacity, which drives down the overall volume of business. In the short term, therefore, raising profitability requires energetic action on the cost side, with an unflinching review of the combination of production factors and distribution channels.