On October 22, 2019, McKinsey & Company released its Global Banking Annual Review 2019. According to the report, Indian revenue growth within India’s banking sector reduced from 22% (2002-07) to 10.3% (2010-18).
i. Indian banks experienced a dramatic drop in ‘return on tangible equity’ from 17.7% in 2013 to 2.3% in 2018.
ii. Bottom third of banks need to rapidly reinvent their business models in order to face the risks posed by fintechs and Silicon Valley giants such as Google and Apple’s Alphabet Inc.
iii. Machine-learning models can improve predictive accuracy in identifying the riskiest potential customers by 35%.
iv. Over 50% of the world’s banks will not survive a downturn as they are unprepared and exposed to unviable assets.
v. 60% banks saw their return on equity (ROE) lower against the cost of equity with the trend deteriorating over the 2009-2019 period.
vi. The report recommends banks to adopt zero based budgeting that includes outsourcing compliance.
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