End of the banking industry's 'best time,' with worsening headwinds - McKinsey warns
October 17, 2024 23:09 JST (excerpt)
There is a possibility that the net interest margin of banks may decrease by about 16% by 2030.
To maintain profits, it is necessary to accelerate the pace of cost reduction by five times.
The American consulting company McKinsey has warned that the profit expansion enjoyed by the world's major banks over the past two years may be 'transient,' predicting headwinds from low interest rates and subdued borrowing demand.
According to McKinsey's annual industry report, the Return on Tangible Equity (ROTE) of about 1,700 deposit-taking institutions increased to 11.7% last year. It was indicated that the past two years have been the 'best time for banks compared to before the world financial crisis.'
The same report points out that in several scenarios, in order for banks to maintain recent profitability, they need to cut costs at a five times normal pace. This is an extremely difficult order for the banking industry, which has struggled significantly to improve productivity.
There is a possibility that the net interest margin of banks may decrease by about 16% by 2030.
To maintain profits, it is necessary to accelerate the pace of cost reduction by five times.
The American consulting company McKinsey has warned that the profit expansion enjoyed by the world's major banks over the past two years may be 'transient,' predicting headwinds from low interest rates and subdued borrowing demand.
According to McKinsey's annual industry report, the Return on Tangible Equity (ROTE) of about 1,700 deposit-taking institutions increased to 11.7% last year. It was indicated that the past two years have been the 'best time for banks compared to before the world financial crisis.'
The same report points out that in several scenarios, in order for banks to maintain recent profitability, they need to cut costs at a five times normal pace. This is an extremely difficult order for the banking industry, which has struggled significantly to improve productivity.
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