Banks worldwide got US$280 billion boost from rising interest rates, McKinsey says
- Interest-rate increases by monetary authorities across the world provided the biggest tailwind for the global banking industry in more than a decade
- Banks in Europe and the US as well as China and Russia have struggled to generate their cost of capital unlike lenders in Singapore, India and Dubai
Banks globally reaped a US$280 billion profit boost in 2022 thanks to rising rates, in the sector’s best performance since the 2008 global financial crisis, McKinsey & Co said.
An unprecedented series of interest-rate increases by monetary authorities across the world has provided the biggest tailwind for the global banking industry in more than a decade. The bonanza has prompted several lenders to announce billions of dollars in share buy-backs.
Though the return on equity jumped to 12 per cent in 2022 from an average 9 per cent since 2010, McKinsey struck a note of caution in its global banking annual review.
“A return to ultralow spreads seems unlikely in the short term, but the outlook for net margins remains uncertain,” the New York-based consultancy said.
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Banks also face rising competition with transactions increasingly moving to non-traditional institutions that are less regulated than lenders, it said in the report.
