UP TO a hundred banks could be broken up or taken over as the industry shifts its focus in the wake of the financial crisis, a report out today claims.
McKinsey said in its review of the sector that while banks have made progress on boosting capital levels and winding down risky assets, returns are dwindling once one-off gains are stripped out.
Underlying return on equity is averaging out at seven per cent, down from 7.9 per cent in 2011 and further below the cost of capital, the consultancy’s report added.
To return to a sustainable level of return in “a fairly cheerless operating environment”, banks will seek out new niches and give up the chase for a universal banking model, prompting a wave of break-ups, McKinsey predicts.
The shake-up could mean the end as a standalone firm for up to 20 per cent of the world’s 500 biggest banking groups.