Due to their lower excess capital reserves, they should explore strategic partnerships to acquire scale or capabilities rather than material acquisitions. It issues credit cards to tens of millions of members. Already we are seeing early success stories from around the world, as banks start to develop platform capabilities. For challenged banks, the sense of urgency is particularly acute given their weak earnings and capital position; banks in this group need to radically rethink their business models. The global banking industry continues to progress on the road back from the global financial crisis, improving return on equity 9.5% in 2013 and 9.9% in the first half of 2014. “Platform” companies such as Alibaba, Amazon, and Tencent—about which we’ll have more to say later—are staking a claim to banks’ customers and the revenues and profits they represent. Developed-market banks are most affected, with $90 billion, or 25 percent, of profits at risk, but emerging-market banks are also vulnerable, especially to the credit cycle. Brazil, China, and Russia could have $50 billion in profits at risk, with China comprising $47 billion. In the base-case scenario, we expect that globally, revenues could fall by about 14 percent from their precrisis trajectory by 2024 (Exhibit 3). But they have some things going for them. Please click "Accept" to help us improve its usefulness with additional cookies. The four archetypes are defined by two dimensions: the bank’s strength relative to peers and the market stability of the domain within which the bank operates (Exhibit 3): To identify the degrees of freedom relevant for each bank archetype, we assessed who they are, or a description of how banks in each archetype have performed economically in recent years (Exhibit 4), and where they live, or the underlying health of the markets in which they operate (Exhibit 5). Japanese and US banks have between $1 billion and $45 billion in profits at risk by 2020, depending on the extent of digital disruption. ‘Return on Tangible Equity’ has fallen from 17.7% in 2013 to 2.3% in 2018. Learn about Our report, A brave new world for global banking: McKinsey global banking annual review 2016, finds that of the major developed markets, the United States banking industry seems to be best positioned to face these headwinds, and the outcome of the recent presidential election has raised industry hopes of a more benign regulatory environment. But few expect this state of suspended animation to last. Flip the odds. Our research confirms that scale in banking, as in most industries, is generally correlated with stronger returns. Time for bold late-cycle moves, the full report on which this article is based (PDF—2MB). They must embed newfound speed and agility, identifying the best parts of their response to the crisis and finding ways to preserve them; they must fundamentally reinvent their business models to sustain a long winter of zero percent interest rates and economic challenges, while also adopting the best new ideas from digital challengers; and they must bring purpose to the fore, especially environmental, social, and governance (ESG) issues, and collaborate with the communities they serve to recast their contract with society. Most of the value creation is coming from banks that adhere to one of five distinctive strategies. Global banking before risk margins (revenue-to-assets)˚ Basis points, YOY 0 100 200 300 400 232 225 337 234 379 379 Developed markets Emerging markets 1 Revenue to average assets, based on a sample of ~1,000 largest banks in terms of assets. By Miklós Dietz, Matthieu Lemerle, Asheet Mehta, Joydeep Sengupta, and Nicole Zhou. Banks in Africa could lose between $1.5 trillion to $4.7 trillion in revenue in four years to 2024 arising from Covid-19 economic turmoil, according to a survey by McKinsey. Global industry market capitalization increased from $5.8 trillion in 2010 to $8.5 trillion in 2017. On the supply side, we expect banks to become more selective in their risk appetite. Market leaders have benefited from favorable market dynamics as well as their (generally) large scale, both of which have allowed them to achieve the highest ROTEs of all bank archetypes—approximately 17 percent average ROTE over the previous three years. In the meantime, second and third waves of infection have arrived in many countries, and as people begin to crowd indoors in the months ahead, the infection rate may get worse. We project that in the base-case scenario, loan-loss provisions (LLPs) in coming years will exceed those of the Great Recession. Global Banking Annual Review, McKinsey zwraca uwagę na to, że dla jednej trzeciej banków to ostatni dzwonek, aby wprowadzić nowe modele biznesowe, poprawić wzrost nieorganiczny lub przeprowadzić gruntowną restrukturyzację. And, although valuations fluctuate, investor confidence in banks is weakening once again. In developed economies, digitization is impacting banks in three major ways. The global banking industry shows many signs of renewed health. All while building the talent and the advanced data-analytics infrastructure required to compete. • 'Return on Tangible Equity' has fallen from 17.7% in 2013 to 2.3% in 2018. Come to McKinsey to do the best work, with the best teams and truly be at your best. Compared to other industries, the ROE of the banking sector places it squarely in the middle of the pack. At 8.6 percent for 2016, ROE was down a full percentage point from 2015. 10. We’ll discuss: A decade after the financial crisis, the global banking industry is on firmer ground. The global banking industry continues to progress on the road back from the global financial crisis, improving return on equity 9.5% in 2013 and 9.9% in the first half of 2014. Time for bold late-cycle moves. Pełna cyfryzacja może przynieść bankom nawet 350 miliardów dolarów w ciągu kolejnych 3-5 lat – wynika z dorocznego raportu McKinsey & Company. Time for bold late-cycle moves. This gain from digitization would lift the average bank’s ROE by about 2.5 percentage points—not enough to fully offset the 4.1-point drop forecasted in our unmitigated scenario. our use of cookies, and On the latter, followers, which have underperformed their peers in buoyant markets, should also reevaluate their portfolios and dispose of nonstrategic assets before the market turns. As growth slows, banks across the globe need to urgently consider a suite of radical organic or inorganic moves before we hit a downturn. Scale can be built, although it takes time; attractive acquisitions and partnerships are currently available for most banks. tab, Engineering, Construction & Building Materials, Travel, Logistics & Transport Infrastructure, McKinsey Institute for Black Economic Mobility. A majority of banks globally may not be economically viable because their returns on equity aren’t keeping pace with costs, McKinsey said in its annual review of the industry released Monday. Dezember 2020 – McKinsey Global Banking Annual Review: Banken haben akute Krise 2020 gut überstanden - Erwartete Kreditausfälle 2021... lassen Eigenkapitalrendite auf 1,5% schrumpfen - Mitte 2020 wurden drei Viertel aller Banken unter Buchwert gehandelt By Evie Rusman October 22, 2019 According to new research, the banking industry is struggling as it approaches the end of the current economic cycle. Introduction . For a print-ready version, please click here (PDF–6MB). Geography, however, is no longer destiny. Management consulting firm McKinsey & Company has published a global banking review and found that a majority of banks worldwide This should be done through a classic ecosystem move, where they can generate capital-light fees by introducing other products into their platforms. As a result, the potential for near-term economic recovery is uncertain. In this layer, institutional intermediation would be heavily automated and provided by efficient technology infrastructures with low costs. According to the Global Banking Annual Review 2019 by the McKinsey and Co, Indian banking sector revenue growth has reduced from 22% (2002-07) to 10.3% (2010-18. We'll email you when new articles are published on this topic. However, unlike market leaders, given that they already operate in an unattractive market and barely earn their cost of capital, they have a higher sense of urgency in making their late-cycle moves. If the integrated economy begins to emerge in a bank’s market, it could be an opportunity for banks that have built these digital skills and rapid reflexes. The good news—at least for banks and the financial systems that societies rely on—is that the industry is sufficiently capitalized to withstand the coming shock. McKinsey designers highlight the photos and illustrations that helped us tell the visual story of a remarkable year. cookies, Explore all our insights on the next normal beyond coronavirus. Who they are. Global banking annual review 2019 www.mckinsey.com. A majority of banks globally may not be economically viable because their returns on equity aren’t keeping pace with costs, McKinsey said in its annual review of the industry released Monday. It is better to launch products off a leaner base and, should a bank seek an acquirer, a lower cost base would also help strengthen valuations. 4 Equatorial Guinea and Libya are plotted manually because of negative growth rates over this period. As banks move from their traditional focus on products and sales to customer-centric marketing, they should reconfirm that their source of distinctiveness is still potent, design and deliver an extraordinary customer experience, and build the digital capabilities needed not just for the next few years but also for the longer term. McKinsey’s annual review of global banks shows that financial institutions are generally not strong enough to weather an economic slump, Bloomberg reported … However, their returns (on average 9.6 percent ROTE) have been little more than half of those of market leaders, who have also operated with the same favorable market dynamics. Archetypal levers comprise three critical moves—ecosystems, innovation, and zero-based budgeting (ZBB)—in two of the three dimensions discussed in Chapter 2 of the full report—that is, productivity and revenue growth. In North America, margins tightened by 46 basis points, lowering ROE by 4.1 percentage points. The variations in banks’ valuations continue to be substantial, but the reasons have shifted dramatically. But just as counter-cyclicality has gained prominence on regulators’ agendas, banks also need to renew their focus on risk management, especially the new risks of an increasingly digital world. Do not deteriorate materially during a downturn, about the entry of nonbanks into financial services, are gradually... Dropped 35 basis points. ) in which this article was edited by Mark Staples an... Of time without spending significant amounts in development or acquisition costs to leaders... 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