McKinsey says one third of banks on the brink in a downturn

Banks are in an end-of-cycle slowdown from which a third of them may not emerge unless they revamp their models for a digital world – and emerging markets aren’t immune.

This is the sobering conclusion of a new report from McKinsey & Co today, October 22. 

“Nearly 35% of banks globally are both sub-scale and suffer from operating in unfavourable markets,” the report says. “Their business models are flawed, and the sense of urgency is acute. To survive a downturn, merging with similar banks may be the only option if a full reinvention is not feasible.”

The report finds that nearly 60% of banks are making returns below their cost of equity – a perilous position if a prolonged economic slowdown takes hold.