search for global sustainable banking

Change requires lighter balance sheets, cost cutting, and to find ways to safely grow in a heavily regulated world.
The global financial crisis and its aftermath of economic and regulatory changes present great challenges to traditional models of working banks in the developed countries and undermining the sector's capacity to a sustainable level of returns for their shareholders.
A new McKinsey report, the state of global banking in search of a sustainable model, indicate that despite a strong overall profit performance in 2010 and the first half of 2011, the return on equity (ROE) of banks in Europe and the United States has not yet recovered to the point where it covers the cost of equity. The gap is to expand in the wake of a new regulatory requirements. Without radical action balance sheets, cut costs and increase revenue to shrink, the banks are not enough new capital investment to attract and their critical role in underpinning economic recovery and growth.


On its face, 2010 was a good year for the industry. Global Banking income a record $ 3.8 trillion reached, and after-tax gain of $ 400 billion in 2009 jumped to $ 712 billion above their 2008 level, if not the 2007 peak. But this rosy picture does not necessarily mean a bright future for banks in Europe and the United States: 90 percent of the profit improvement can be attributed to a decrease in the provision for loan losses, and most, if not all, the good news coming from emerging markets. Decreasing cross-border capital flows, high bank credit-default swap spread and sustained low market valuations are all pointing to declining investor confidence in the industry's future, long before the recent alarms about sovereign debt during the summer of 2011.
As a result, investors are reassessing the banking industry's long-term growth prospects and the reassessment of the sector. The main problems include the rising cost of business thanks to mainly to new regulations requiring banks more capital and liquidity to take to ensure the industry better withstand future shocks, scarcity of capital and liquidity to consumers' behavior change as a growing number of customers moving mobile and online channels, and diverse growth of local roads.
In 2010, the U.S. and European banking industry provided a roe of only 7 and 7.9 percent respectively. Even when these normalized returns (assuming the loan losses similar to the 2000 to 2007 average), the 2010 ROE figures only to 9.3 percent in the United States and 9.2 percent in Europe. At this level, the Bank's deer is about 1.5 percentage points below the cost of the shares. Even before the operation, the additional capital requirements of Basel III and other excesses by the global and national regulators, banking in developed countries a significant yield gap in the face is considered consumed.
We calculate that a deer, 12% by 2015 to achieve the European and North American banks have more than $ 350 billion of net profit in the period twice the current level to add. This amount is more than the total profits of the global pharmaceutical and automotive industries combined.
In Europe and North America, it is clear that business as usual is not an option. Banks are pressed for capital gains under pressure, and opportunities for growth in the developed world seems to be in a deficit.Emerging markets, project, will contribute almost half of all banking revenue over the world by 2020, compared with only one-third today and will be 60 percent of all income growth in the banking sector over the next decade represents.
The process of transformation is already under way at many banks, but even market leaders must intensify their efforts to the long-term crop production needed to attract investors. In our opinion, the banks combine three moves:
Shrink the balance sheet. Banks in both Europe and North - America must find ways to work with less capital and use them more effectively. A way forward for European banks is a significant part of their loan moved to the capital of such a nature that the banks lend less direct and help revive the corporate-bond market. In Europe, these bonds only address 20 percent of the credit needs of businesses, compared with 60 to 70 percent in the United States of America.
That kind of change would be challenging on both an individual bank and system and will be an extension of the traditional debt markets and the development of low-cost alternative for them, action for the investor base in the bond market to expand and the creation of new and safer asset and mortgage-backed securitization markets. Ways to balance sheets is less capital intensive to make the shift without risk to capital markets include a more sophisticated approach to risk-weighted asset calculation, the optimization of credit lines, and better management of collateral. Individual banks will increase their capital efficiency by making capital and liquidity management a much more central, long-term discipline.
Rebase costs. To a deer, 12 percent achieved through cost cutting alone one of the other actions we recommend banks want to reduce their expenses by up to 6 percent per year between now and 2015. It is a tall order, since only about 1 in 50 bank annual cost reduction of 4% or more in the years 2000 to 2010. But other industries, especially telecommunications, have responded to the new regulation, technology, and the competition to dramatically improve their productivity. Banking remains one of the most fragmented sector worldwide, and depending on the attitude of the national regulators, some institutions should be able to scale mergers and acquisitions to pursue.
What's more, we found that banks as much as half the cost of their branches to eliminate the movement of sales and service online. Some banks have shown what can be achieved by the application of lean and other techniques-for example, cutting the time a connection to 60 minutes to process, from the days.
Capture new opportunities. Banks overcomes the previous crises by seeking innovative ways to increase top line. While opportunities may seem limited, we see great scope for prices to improve products to adapt to the needs of customers, and new pockets of growth can be found (taking advantage of better risk management introduced many In the aftermath of the crisis). Opportunity lies in the potential for a disruptive technology in both consumer and wholesale banking much of the banking industry's digital strategies are still in their infancy.
Action for the banks' roe recovery to a level at least equal to, or higher, the cost of equity is not only essential for the industry's own health, but also a prerequisite for long-term economic recovery .