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Banking

Bank ROE roller coaster: the point of no return

For several years, bank chief executives have harmed their credibility by promising medium-term earnings targets that they have never come close to hitting. Some have been ousted as a result. No more. In 2015 and beyond, 10% is the new 15% when it comes to projections of future returns on equity. Few are even hitting that lower target, which barely covers their cost of their equity. But there are signs that investors are starting to see the value in lower, less risky, more sustainable returns. And capital costs are falling. Could this be the end of the ROE roller coaster?

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Illustration: Kevin February; research Tessa Wilkie



Large global banks have spent the years since the financial crisis raising equity, shedding assets, reducing risk and cutting costs in a now constant effort to reinvent themselves and present a credible business case for shareholders to invest in.



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