McKinsey released their latest Banking Industry report, predicting:
"In the next three to five years, McKinsey says a whole new market structure is likely to emerge in global banking.
Firstly, anything from five to seven of today’s 10 global banks are likely to stop being global banks offering all things to all people. They will cut entire product lines and cull regional offices. The banks that don’t will have “scale” across products and regions.
Secondly, a tier of eight to 12 global players with scale in ‘chosen product bundles’ will appear.
Thirdly, national and regionally focused banks with strong corporate client bases will consolidate their local strength and offer some investment banking products.
And fourthly, non-bank competitors will start in particular areas and expand their range of businesses."
Source:
(1) eFinancial Careers
http://news.efinancialcareers.com/uk-en/255435/th…
(2) McKinsey's "Capital markets and investment banking 2016: Time for tough choices and bold actions" report (September 2016)
http://www.mckinsey.com/industries/financial-serv…
Thoughts? What banks will remain global?
Maybe Citi?
I think that we've been seeing this from some time now. I wouldn't be surprised if European BBs keep cutting back the business that they are doing in the U.S. As far as consolidation goes, we've also seen this for some time. Regional banks are gobbling up smaller competitors and growing both to expand geographically, but also because smaller banks just cannot afford to comply with regulations.
The one area that I am very curious to see evolve is FinTech. I would not be surprised if that bubble bursts sooner or later. There is just no real credit quality measurement going on there, at least when these FinTech companies are growing, and that's just not the proper way to grow a finance company. I think there is a mismatch between how to properly run a finance company and the Silicon Valley guys doing the actual running.
On your last point, I could see the mismatch going way as banks embrace more technology (i.e. through proper acquisition and growth).
I agree, tech companies are currently the beneficiary of high growth multipliers affecting valuations which allow them to be highly leveraged. I think we saw a preview of what could happen when multipliers recede(Linkedin, Tableau) and investors place more emphasis on turning growth in to profitability.
True. I think, though, what is really worrisome is how these FinTech companies are growing. They are growing like a tech company does: expand your customer base as fast as possible and don't pay attention to quality. Once you are the market leader, look at customer quality. That just doesn't work in finance. Lenders have to pay attention to customer/credit quality. JC Flowers gave a pretty good blurb about this in the below WSJ article.
http://www.wsj.com/articles/fintech-will-mostly-end-in-tears-christophe…
A part of me thinks that McKinsey may be onto something, but the most obvious thing to ask is how biased their publication is. They are a consultancy and sell the types of services that they're creating a market for with this type of "industry report."
Agree with you on this Oxonian2017. This made by McKinsey might have some relevant points to it, but it's also been fabricated with their agenda in mind.
If it was some what true JPM Citi UBS Credit Suisse Barclays BNP
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