Bold strategies may help global banks double their value in 5 yrs – BCG

Global banks could potentially double their current valuations, creating at least $7 trillion in value over the next five years by capturing a fair share of expected growth and improving price-to-book ratios, according to a Monday report by the Boston Consulting Group (BCG), according to Reuters.

“The goal is not only to create shareholder value but also to meet their obligations to drive economic growth and finance the climate transition,” the report said.

To reach these goals, banks need to address their performance issues, set a bold strategy that promotes growth, significantly enhances productivity, and attracts investors for additional capital infusion.

In 2022, nearly 75% of bank stocks had price-to-book ratios under 1, and price-to-earnings multiples were about half of what they were in 2008.

Bank stocks have underperformed major market indexes in terms of shareholder returns since the financial crisis, and this performance gap is growing.

BCG said that even with investments in productivity and significant business simplification, banks’ profits will still face challenges due to higher capital requirements and rising competition from new entrants like fintechs.