Higher profitability: Rising interest rates boost returns for banks worldwide

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On Wednesday, McKinsey wrote that the past 18 months have probably been the best period for the financial sector since 2007. In 2010, average return on equity was only 9 percent. The key figure relates profit to equity capital employed and therefore shows how efficiently companies use that money.

Overall, McKinsey expects profits of around $1.4 trillion for the entire industry in 2023; This represents a doubling since 2017. The average core capital ratio of financial institutions reached the highest level of the last decade with 13.8 percent. For global figures, McKinsey evaluated data from the world’s 1000 largest banks.

However, according to the statement, Swiss industry was only able to partially benefit from this development due to relatively low interest rates. In the statement of Christian Zahn, head of the “Swiss Banking and Insurance Practice” at McKinsey, it appears that in general the average return on equity in Switzerland for 2023 is well below the global average, again due to special effects.

However, due to structural differences, the Swiss financial center’s margins are higher than in many other European markets. The country will particularly benefit from its continued strength as the largest offshore booking center of the private banking sector, with a total investment volume of $2,930 billion and an ongoing growth rate of 3 percent during 2018-2022.

McKinsey sees the “green transformation” of the economy, which requires significant investments, as an opportunity for the sector. The consultancy firm estimates that the relevant financing volume for Switzerland in areas such as transport, buildings and energy supply will be between 700 and 800 billion francs by 2050. Sustainable change in the economy can only be successful if banks provide financing and financial infrastructure. That’s why it’s said. (SDA)

Source :Blick