Global banking sector hits record profits in 2014, but sees margins erode: McKinsey
THE global banking industry, which earned a record US$1 trillion last year thanks to Chinese lenders, will likely have revenue growth continue at a pace of about 3 per cent annually over the next few years - a growth closely aligned to global gross domestic product, said a McKinsey report on Wednesday.
But this comes as margins will continue to erode, the consultancy added. A review of the top 500 banks globally showed a decline of 185 basis points in margins last year, due to a combination of low interest rates, stronger competition, and disruption from fintechs.
This margin erosion can be balanced "to a degree" by improvements in operating costs, McKinsey noted, adding that capital has been largely replenished. Return on equity is expected to continue tracking between 8 per cent and 10 per cent annually, it said.
"After years of upheaval, global banking has settled into a new reality, characterised by stable returns and strong profits, but slow growth," explained McKinsey. "As digitisation accelerates, banks will be in a battle for the customer that will define the industry for the next 10 years."
BT is now on Telegram!
For daily updates on weekdays and specially selected content for the weekend. Subscribe to t.me/BizTimes
Banking & Finance
Japanese yen slides back towards 34-year low after brief spike
China’s Bank of Communications Q1 profit rises 1.44%
HSBC’s private bank shuts independent asset management business in HK, Singapore
Nomura Q4 net profit jumps almost eight-fold on retail income surge
Rescue pup to meme star: the real-life ‘Dogecoin’ dog
Money laundering accused Zhang Ruijin slapped with 5 more charges days before scheduled guilty plea