Since the GFC 12 years ago global banks have strived to deliver ROE >10% which is approximately the cost of capital. The US banks were the most successful, JPN got close, many EUR and UK banks struggled and the CHN banks pursued different goals.
A recent IMF analysis models the ROE to plunge to a median near 5% in 2020. The situation will deteriorate further by 2025 with close to 95% of banks ROE below 10% and the median still circa 5%. Around 20% will have negative ROE for the next 5 years. The low interest rate countries are worst impacted.
https://lnkd.in/gKMyPBM
So what lies ahead for embattled banks....More cost cutting is inevitable. More attempts to grow fee income too, but this lemon is already well squeezed.
Why should investors stump up more capital with such paltry returns? There has to be consolidation. Expect the vulture funds to be hovering and arranged marriages or managed wind downs as the end game. It could get messy...