Assessing Banks’ Confidence After the Crisis
Financial-services executives report a mostly positive outlook on banking — and some signs of industry complacency.
McKinsey Global Survey results
Nearly three years after the global financial crisis, a recent McKinsey survey of executives in financial services indicates that their institutions overall feel positive, in line with the restored performance many are seeing: respondents note few concerns about the availability of funding, though those working at European banks are more concerned than others. Only about half say their institutions plan to reduce costs by more than 5 percent, and slightly more than half who expect future returns on equity to be high (greater than 15 percent) already saw high returns last year.
But at points beneath the surface, respondents indicate complacency, a lack of organization-wide responses to trends, or serious problems. Strong shares of respondents report that their top managements spend only up to 25 percent more time on regulatory and government issues than before the crisis and—contrary to the predictions of many analysts—say the Basel III regulation will have just a marginal impact on credit and growth. A full quarter of respondents don’t know what share of their customers currently use online banking. More than half of investment bankers say their institutions adequately managed risk during the crisis. And many respondents at European banks report plans to scale down products, geographies, or customer segments in response to the constrained funding environment.
The state of funding and strategy
Most respondents say their financial institutions are not having trouble securing funds, although the availability or cost of funds is an important part of strategy for the vast majority of them. Respondents at institutions catering to corporate and/or wholesale customers are more likely to cite funding challenges than respondents where the focus is primarily on retail customers—but those institutions are also less likely to make funding a top com- ponent of their strategies.
Though funding is an important component of strategy, a third of respondents—the largest share—say their institutions have made no changes to strategy based on changes in the funding environment. Among those who say they have made a change, more say their banks are emphasizing “funding-light” products (such as commercial loans) or customers (such as retail-distribution companies) than other options the survey asked about. Regionally, the pressure to act seems strongest for institutions headquartered in Europe: respondents there are three times likelier to say their institutions will exit or scale down funding-intensive products than banks based in developed Asian countries2 or developing markets,3 which include China, India, and Latin America (Exhibit 1).