A recent report published by Boston Consulting Group emphasizes the need for banks to take bold steps in order to significantly increase their valuations. Although the report acknowledges that global banks may not be able to reach the profitability levels and valuations seen before the global financial crisis, it suggests that a combined value of $7 trillion can still be created, effectively doubling current valuations.
To achieve this ambitious goal, the report urges banks to thoroughly analyze and address their performance issues. It calls for the development of a strategic agenda that prioritizes growth, higher productivity, and satisfactory shareholder returns. According to the report, achieving such outcomes requires banks to make key changes to their operations and business models.
The recent earnings season for major U.S. banks began with mixed results for JPMorgan Chase, Citigroup, Wells Fargo, and Bank of America. However, share prices for bank stocks closed mostly lower. Investors are now eagerly awaiting the earnings reports of Goldman Sachs and Morgan Stanley, which are expected to provide insights into the year ahead for banks.
Looking ahead to the long term, Boston Consulting Group’s strategists stress the importance of implementing bold measures to increase shareholder value. The report suggests that banks should consider exiting certain business lines or reducing exposure to low-return asset classes. Instead, they should redirect investments toward new areas of growth with more favorable returns on equity.
Furthermore, the report highlights the significance of streamlining business models and leveraging generative artificial intelligence for a competitive advantage. It calls for banks to simplify their operations considerably and conduct a detailed analysis of cost-drivers. By doing so, banks can aim to achieve a 40% increase in productivity, thus enabling them to compete more effectively.
In conclusion, the report emphasizes that by pursuing a strategic agenda focused on growth, increased productivity, and simplified business models, banks have the potential to boost their valuations significantly. While they may not reach the levels seen before the financial crisis, a combined value of $7 trillion can still be created, bringing promising opportunities for the banking industry.