What’s in store for global banking

Global banking may be passing through a major cyclical correction at the end of 2007, but new McKinsey research suggests that in the longer term the industry’s revenues and profits—poised to continue growing faster than the rate of GDP growth—will double by 2016.
The historical part of the analysis, which examines global data from 2000 to 2006, reveals a rich mosaic of regional, national, and product diversity. There is little global convergence: different factors seem to drive different markets, which have surprisingly varied structures and uneven growth patterns.
In 2016, the market capitalization of banks will likely be $12 trillion higher than it is today. As consolidation in the sector accelerates, winners will be able to outmaneuver their competitors by developing a deep, bottom-up understanding of the idiosyncrasies of markets and by understanding the vital importance of being in the right place at the right time.

Exhibit 1: Banking has become the industry with the highest absolute profits.
Exhibit 2: Banking profits are likely to remain at a historical high over the next ten years.
Exhibit 3: Developed countries still account for the bulk of banking activity.
Exhibit 4: The mix of banking business in different countries or regions varied significantly.
Exhibit 5: Key drivers of growth in retail-banking revenues differ dramatically across countries.
Exhibit 6: The annual growth of a bank’s investment value is a combination of its after-tax growth in profits adjusted for changes in market multiples.