Continuing turmoil in global capital markets after the credit crunch of mid-2007 has clouded the short-term outlook, especially in investment banking. We believe, however, that corporate banking in Europe will benefit from several profitable growth areas over the next 18 months and that shrewd players should position themselves accordingly.

The current financial crisis and higher funding costs will doubtless hit products such as straight loans, asset-backed securities, and leveraged finance. But increased interest rate spreads and a more risk-averse business environment should promote other products and services, including cash management and corporate risk mitigation. By focusing on a clear set of opportunities, European corporate-banking executives can limit the impact of the current malaise and look forward to a period of continued, albeit slower, revenue growth.

In the decade leading up to mid-2007, corporate-banking revenues in Europe grew solidly, at an average rate of around 7 percent a year. Central and Eastern Europe enjoyed a particularly good run, with average annual revenue growth of around 13 percent—and a benign risk environment kept loan losses in check.

But in the wake of the recent credit crunch, borrowing costs in the interbank market have moved higher, along with the cost of capital market...