Profitability at banks worldwide benefitted from rising rates in 2022, according to a report by McKinsey & Co., with markets around the Indian Ocean emerging as the global leaders.
In 2022, banks globally benefitted from an income boost via rising interest rates leading to $280 billion more in profits and an increase in return on equity to 12 percent, according to a report by consultancy firm McKinsey & Co.
The report notes that many of the world’s leaders were located around the Indian Ocean, stretching from Singapore to India, Dubai and parts of eastern Africa. The region, dubbed the «Indo-Crescent», was home to 51 percent of the best performing banks in the world, based on market valuation.
Slowing Growth
But elsewhere, including in Asia, growth was notably slower.
«The geographic divergence we have noted in previous years also continues to widen,» McKinsey said. «[I]n Europe and the United States, as well as in China and Russia, banks overall have struggled to generate their cost of capital.»
Profit Outlook
Overall, banks generated a net income of $1.3 trillion in 2022, up from $1 trillion in 2021. Next year, McKinsey forecasts that the industry will post a net income of $1.4 trillion.
«A return to ultra-low spreads seems unlikely in the short term, but the outlook for net margins remains uncertain,» the report added.
