McKinsey estimated the impacts of a slowing economy for Russian banks


Russian banks in the conditions of slowing global economic growth by 2020, could lose $25 billion profit, predict analysts of the consulting company McKinsey. As stated in the review of the global banking sector by McKinsey, with the risk of falling profits in this period, banks face around the world because of slow growth of the world economy, the rapid development of digital technology and tightening Bank regulation.

More likely, according to analysts, the company affected banks in developed countries: they risk losing 25% profit, or $90 billion Among the banks from the developed countries most vulnerable British and other European banks. Amid slowing economic growth and the continued policy of low interest rates, they risk to reduce total profits, which, according to McKinsey, at the moment is $110 billion, 31%, or $35 billion If these factors added to the rapid development of digital technology, the profits may decline more than doubled to $50 billion — despite the efforts of banks to reduce risks, and low return on equity (ROE), which now stands at 3-4%, will drop to 1-2%.

Banks from developing countries face other challenges. As explained by analysts McKinsey, structurally they are more profitable than banks from developed countries: in most cases they have a return on equity exceeds 10% of the cost of capital. But these banks are vulnerable from the point of view of the credit cycle. Among the developing countries, the most profit — $47 billion — can lose by 2020 Chinese banks. At low growth rates an additional credit loss of banks in China could reach $220 billion, but the current high profits of $320 billion of Chinese banks will be able to withstand these losses, I believe at McKinsey.

As noted in McKinsey, the credit cycle is one of the major risk factors for the Eastern banks, and Russian banks are the most vulnerable. “If the credit cycle will continue to slow without the possibility of recovery, banks [in Russia and other Eastern European countries] will have to seriously restructure costs,” the review says. On the contrary, in the case of improving economic situation, the Russian banks can reduce credit losses by $20 billion, banks in other countries of Eastern Europe — $2 billion.

Less serious loss of profits expected from American and Japanese banks, the report says. By 2020 in the context of slow economic growth and accelerated development of digital technologies, their total profit could be reduced by 2020 by 18% ($45 billion). However, the McKinsey experts believe that the Japanese and us banks able to maintain profitability. According to their forecasts, by 2020 the profitability of their capital could be reduced by only 1 percentage point: up to 8% American and 5% are Japanese.

To counter the risk factors, banks around the world in the coming years will need to hold an “unprecedented transformation”, noted McKinsey. Banks, in particular, must take measures to maintain income, cut costs, and to improve balance and to ensure the preservation of core assets. Banks should also strengthen the customer focus in the digital age (including greater flexibility in operating models and IT infrastructure).

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