BREAKING NEWS

Banks must reinvent themselves before next downturn - McKinsey

Euronews logo
Text size Aa Aa

(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.

“The industry in aggregate is not in great health, because 60% 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.

McKinsey said banks should invest in artificial intelligence-driven risk analytics, cut costs by outsourcing, and grow revenue by improving services for customers.

That should include careful investment, including in mergers and acquisitions, to prepare for digital disruption down the line and seek out new revenue sources, it said.

(Reporting by Bharath Manjesh in Bengaluru; Editing by Maju Samuel)

euronews provides breaking news articles from reuters as a service to its readers, but does not edit the articles it publishes. Articles appear on euronews.com for a limited time.
Euronews is no longer accessible on Internet Explorer. This browser is not updated by Microsoft and does not support the last technical evolutions. We encourage you to use another browser, such as Edge, Safari, Google Chrome or Mozilla Firefox.