Global Banking Review Finds 1/3 Of Banks Unlikely To Survive Economic Downturn

(Reuters) A third of banks globally are unlikely to survive a serious economic downturn and must radically revamp their business models, management consultancy McKinsey said in a report on the industry on Monday.

A decade on from the global financial crisis, investor confidence in banks globally is also again weakening as margins tighten, and revenues and loan growth slow, the consultancy, which advises senior management on major strategic changes, said in the report.

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“The industry in aggregate is not in great health, because 60 per cent of banks don’t have returns that exceed cost of equity and we see that as a call to action,” said Kausik Rajgopal, a managing partner for McKinsey and one of the main authors of the report.

A prolonged economic slowdown with low or even negative interest rates could wreak havoc on the sector, the consultancy said, as it faces threats from a raft of small fintech startups and bigger technology companies looking to enter banking or payment businesses.