The logos of three of South Africa's major banks - ABSA, Standard Bank and First National Bank (FNB) - feature on towers across Cape Town's skyline. Globally, banks are forecast to lose about half a year's annual revenue as a result of the pandemic. Reuters.
The logos of three of South Africa's major banks - ABSA, Standard Bank and First National Bank (FNB) - feature on towers across Cape Town's skyline. Globally, banks are forecast to lose about half a year's annual revenue as a result of the pandemic. Reuters.
The logos of three of South Africa's major banks - ABSA, Standard Bank and First National Bank (FNB) - feature on towers across Cape Town's skyline. Globally, banks are forecast to lose about half a year's annual revenue as a result of the pandemic. Reuters.
The logos of three of South Africa's major banks - ABSA, Standard Bank and First National Bank (FNB) - feature on towers across Cape Town's skyline. Globally, banks are forecast to lose about half a y

Global banking sector could lose up to $4.7tn revenue over four years due to Covid-19


Deepthi Nair
  • English
  • Arabic

The global banking industry could lose between $1.5 trillion to $4.7tn in cumulative revenue between 2020 and 2024 because of the effects of Covid-19, according to a new report from consultancy McKinsey.

Banks will need to fundamentally reinvent their business models to sustain a long period of zero or near-zero per cent interest rates and other economic challenges, according to McKinsey's latest Global Banking Annual Review.

“Middle East banks have also been severely impacted across all levers, i.e. margin decline, demand slowdown and increased credit losses. However, capital and liquidity positions remain strong, allowing these institutions to weather the storm,” said Jawad Khan, McKinsey’s banking practice leader in the Middle East.

Capital and liquidity position remains strong, allowing these [Middle East] institutions to weather the storm

“Challenges will remain in the mid-term, but this is the time for banks to re-think their operating model to drive productivity and become even more capital-efficient.”

Governments around the world have provided $12tn in fiscal stimulus measures to support the global economy from the fallout of Covid-19, with central banks adding a further $7.5tn in monetary measures as at the end of September, according to the International Monetary Fund.

However, this has come at a cost to lenders as lower interest rates push down the margins they can make from offering loans to customers.

McKinsey's report argued that banks face a two-stage problem. The first will be severe credit losses, likely to last until late next year.

The extended lockdowns in some cities globally will result in people and businesses unable to keep up with their payment obligations, resulting in increased personal and corporate defaults. Global banks have provisioned $1.15tn for loan losses through the first three quarters of 2020, surpassing those for all of 2019, McKinsey found.

“We project that in the base-case scenario, loan-loss provisions in coming years will exceed those of the [global financial crisis],” the consultancy said.

In the second stage, amid a muted global recovery, banks will face a “profound” challenge to ongoing operations that “may persist beyond 2024”, the consultancy said.

“On an absolute basis, compared with pre-crisis growth projections, the Covid-19 crisis may cost the industry $3.7tn – the equivalent of more than a half year of industry revenues that will never come back.”

McKinsey also estimated that banks’ return on equity would continue its decline, from 8.9 per cent in 2019 to 4.9 per cent in 2020 and 1.5 per cent in 2021.

The industry is sufficiently capitalised to withstand likely credit losses, with average tier-1 equity capital ratios due to fall to 10.9 per cent next year from 12.5 per cent last year, before recovering to 12.1 per cent by 2024, McKinsey estimated.

With banks expected to remain stretched, the consultancy outlined three ways for financial institutions to rebound. They must embed speed and agility into their practices, reinvent business models to sustain “a long winter of zero per cent interest rates” and weave in more environmental, social and governance practices into their operations.

“Banks will need to act quickly to return to pre-crisis RoE levels, in a far more challenging environment than the decade just past,” said Marie-Claude Nadeau, McKinsey partner and report co-author.

McKinsey expects the Covid-19 pandemic to cost the global banking industry $3.7tn in revenue on an absolute basis.
McKinsey expects the Covid-19 pandemic to cost the global banking industry $3.7tn in revenue on an absolute basis.

“The trade-off between rebuilding capital and paying dividends will be stark,” Ms Nadeau added.

Banks will also need to accelerate the shift to digital operations and reconfigure their branch networks, where demand has softened. The McKinsey report found that in the past year, the use of cash and cheques has eased; in most markets, about 20 to 40 per cent of consumers report using significantly less cash.

Although customer interest in digital banking has increased in many markets, this trend varies widely. In the UK and the US, only 10 to 15 per cent of consumers are more interested in digital banking than they were before the crisis, while in Greece, Indonesia, Mexico and Singapore, the “more interested” share ranges from 30 to 40 per cent, McKinsey research found.

“Banks will need to retrain some branch bankers, in part by conceiving flexible roles that mix on-site and remote work. Branch bankers can perform their traditional teller tasks with some portion of their time. With the remainder, they can get trained on new skills to become contact centre agents,” the consultancy said.

Company%20Profile
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Diriyah%20project%20at%20a%20glance
%3Cp%3E-%20Diriyah%E2%80%99s%201.9km%20King%20Salman%20Boulevard%2C%20a%20Parisian%20Champs-Elysees-inspired%20avenue%2C%20is%20scheduled%20for%20completion%20in%202028%0D%3Cbr%3E-%20The%20Royal%20Diriyah%20Opera%20House%20is%20expected%20to%20be%20completed%20in%20four%20years%0D%3Cbr%3E-%20Diriyah%E2%80%99s%20first%20of%2042%20hotels%2C%20the%20Bab%20Samhan%20hotel%2C%20will%20open%20in%20the%20first%20quarter%20of%202024%0D%3Cbr%3E-%20On%20completion%20in%202030%2C%20the%20Diriyah%20project%20is%20forecast%20to%20accommodate%20more%20than%20100%2C000%20people%0D%3Cbr%3E-%20The%20%2463.2%20billion%20Diriyah%20project%20will%20contribute%20%247.2%20billion%20to%20the%20kingdom%E2%80%99s%20GDP%0D%3Cbr%3E-%20It%20will%20create%20more%20than%20178%2C000%20jobs%20and%20aims%20to%20attract%20more%20than%2050%20million%20visits%20a%20year%0D%3Cbr%3E-%20About%202%2C000%20people%20work%20for%20the%20Diriyah%20Company%2C%20with%20more%20than%2086%20per%20cent%20being%20Saudi%20citizens%0D%3C%2Fp%3E%0A
UAE currency: the story behind the money in your pockets
Pakistanis%20at%20the%20ILT20%20
%3Cp%3EThe%20new%20UAE%20league%20has%20been%20boosted%20this%20season%20by%20the%20arrival%20of%20five%20Pakistanis%2C%20who%20were%20not%20released%20to%20play%20last%20year.%20%0D%3Cbr%3E%0D%0D%0D%3Cbr%3E%3Cstrong%3EShaheen%20Afridi%20(Desert%20Vipers)%20%3C%2Fstrong%3E%0D%3Cbr%3ESet%20for%20at%20least%20four%20matches%2C%20having%20arrived%20from%20New%20Zealand%20where%20he%20captained%20Pakistan%20in%20a%20series%20loss.%20%0D%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EShadab%20Khan%20(Desert%20Vipers)%20%3C%2Fstrong%3E%0D%3Cbr%3E%0DThe%20leg-spin%20bowling%20allrounder%20missed%20the%20tour%20of%20New%20Zealand%20after%20injuring%20an%20ankle%20when%20stepping%20on%20a%20ball.%20%0D%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EAzam%20Khan%20(Desert%20Vipers)%20%3C%2Fstrong%3E%0D%3Cbr%3EPowerhouse%20wicketkeeper%20played%20three%20games%20for%20Pakistan%20on%20tour%20in%20New%20Zealand.%20He%20was%20the%20first%20Pakistani%20recruited%20to%20the%20ILT20.%20%0D%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EMohammed%20Amir%20(Desert%20Vipers)%20%3C%2Fstrong%3E%0D%3Cbr%3EHas%20made%20himself%20unavailable%20for%20national%20duty%2C%20meaning%20he%20will%20be%20available%20for%20the%20entire%20ILT20%20campaign.%20%0D%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EImad%20Wasim%20(Abu%20Dhabi%20Knight%20Riders)%20%3C%2Fstrong%3E%0D%3Cbr%3EThe%20left-handed%20allrounder%2C%2035%2C%20retired%20from%20international%20cricket%20in%20November%20and%20was%20subsequently%20recruited%20by%20the%20Knight%20Riders.%26nbsp%3B%3C%2Fp%3E%0A
F1 The Movie

Starring: Brad Pitt, Damson Idris, Kerry Condon, Javier Bardem

Director: Joseph Kosinski

Rating: 4/5

Jetour T1 specs

Engine: 2-litre turbocharged

Power: 254hp

Torque: 390Nm

Price: From Dh126,000

Available: Now

David Haye record

Total fights: 32
Wins: 28
Wins by KO: 26
Losses: 4

Prop idols

Girls full-contact rugby may be in its infancy in the Middle East, but there are already a number of role models for players to look up to.

Sophie Shams (Dubai Exiles mini, England sevens international)

An Emirati student who is blazing a trail in rugby. She first learnt the game at Dubai Exiles and captained her JESS Primary school team. After going to study geophysics at university in the UK, she scored a sensational try in a cup final at Twickenham. She has played for England sevens, and is now contracted to top Premiership club Saracens.

----

Seren Gough-Walters (Sharjah Wanderers mini, Wales rugby league international)

Few players anywhere will have taken a more circuitous route to playing rugby on Sky Sports. Gough-Walters was born in Al Wasl Hospital in Dubai, raised in Sharjah, did not take up rugby seriously till she was 15, has a master’s in global governance and ethics, and once worked as an immigration officer at the British Embassy in Abu Dhabi. In the summer of 2021 she played for Wales against England in rugby league, in a match that was broadcast live on TV.

----

Erin King (Dubai Hurricanes mini, Ireland sevens international)

Aged five, Australia-born King went to Dubai Hurricanes training at The Sevens with her brothers. She immediately struck up a deep affection for rugby. She returned to the city at the end of last year to play at the Dubai Rugby Sevens in the colours of Ireland in the Women’s World Series tournament on Pitch 1.

THE LOWDOWN

Photograph

Rating: 4/5

Produced by: Poetic License Motion Pictures; RSVP Movies

Director: Ritesh Batra

Cast: Nawazuddin Siddiqui, Sanya Malhotra, Farrukh Jaffar, Deepak Chauhan, Vijay Raaz

Porsche Macan T: The Specs

Engine: 2.0-litre 4-cyl turbo 

Power: 265hp from 5,000-6,500rpm 

Torque: 400Nm from 1,800-4,500rpm 

Transmission: 7-speed dual-clutch auto 

Speed: 0-100kph in 6.2sec 

Top speed: 232kph 

Fuel consumption: 10.7L/100km 

On sale: May or June 

Price: From Dh259,900  

The specs
  • Engine: 3.9-litre twin-turbo V8
  • Power: 640hp
  • Torque: 760nm
  • On sale: 2026
  • Price: Not announced yet
West Asia Premiership

Dubai Hurricanes 58-10 Dubai Knights Eagles

Dubai Tigers 5-39 Bahrain

Jebel Ali Dragons 16-56 Abu Dhabi Harlequins

Key facilities
  • Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
  • Premier League-standard football pitch
  • 400m Olympic running track
  • NBA-spec basketball court with auditorium
  • 600-seat auditorium
  • Spaces for historical and cultural exploration
  • An elevated football field that doubles as a helipad
  • Specialist robotics and science laboratories
  • AR and VR-enabled learning centres
  • Disruption Lab and Research Centre for developing entrepreneurial skills
UAE v Gibraltar

What: International friendly

When: 7pm kick off

Where: Rugby Park, Dubai Sports City

Admission: Free

Online: The match will be broadcast live on Dubai Exiles’ Facebook page

UAE squad: Lucas Waddington (Dubai Exiles), Gio Fourie (Exiles), Craig Nutt (Abu Dhabi Harlequins), Phil Brady (Harlequins), Daniel Perry (Dubai Hurricanes), Esekaia Dranibota (Harlequins), Matt Mills (Exiles), Jaen Botes (Exiles), Kristian Stinson (Exiles), Murray Reason (Abu Dhabi Saracens), Dave Knight (Hurricanes), Ross Samson (Jebel Ali Dragons), DuRandt Gerber (Exiles), Saki Naisau (Dragons), Andrew Powell (Hurricanes), Emosi Vacanau (Harlequins), Niko Volavola (Dragons), Matt Richards (Dragons), Luke Stevenson (Harlequins), Josh Ives (Dubai Sports City Eagles), Sean Stevens (Saracens), Thinus Steyn (Exiles)

ESSENTIALS

The flights

Emirates flies from Dubai to Phnom Penh via Yangon from Dh2,700 return including taxes. Cambodia Bayon Airlines and Cambodia Angkor Air offer return flights from Phnom Penh to Siem Reap from Dh250 return including taxes. The flight takes about 45 minutes.

The hotels

Rooms at the Raffles Le Royal in Phnom Penh cost from $225 (Dh826) per night including taxes. Rooms at the Grand Hotel d'Angkor cost from $261 (Dh960) per night including taxes.

The tours

A cyclo architecture tour of Phnom Penh costs from $20 (Dh75) per person for about three hours, with Khmer Architecture Tours. Tailor-made tours of all of Cambodia, or sites like Angkor alone, can be arranged by About Asia Travel. Emirates Holidays also offers packages. 

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