The global banking industry staged a sharp recovery in both revenues and profits in 2010 and the first half of 2011. Yet a number of forward-looking indicators highlight limited confidence in the long-term health of the industry. If banks in developed regions are to secure a sustainable future, they will need to transform their business models in ways more radical than many have contemplated to date.
In Europe and North America, it is clear that business as usual is not an option for banks. They are squeezed for capital, profits are under pressure and growth opportunities in the developed world appear to be in short supply.
Emerging markets, we project, will contribute nearly half of all global banking revenues by 2020, compared with just one-third today, and will represent 60 percent of all global banking revenue growth over the next decade.
A process of transformation is already under way at many banks, but even market leaders must intensify their efforts to produce the long-term returns needed to attract investors. If banks are unable to attract the necessary level of equity and long-term debt capital, they will not be able to support lending to the real economy.
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