BCG: Boosting Banks with a Mind-Blowing US$7tn Valuation Transformation

A new study by Boston Consulting Group (BCG) has revealed that global banks have the potential to increase their combined value by a whopping US$7tn over the next five years. However, BCG warns that this can only be achieved if banks take bold steps to boost productivity and promote growth. The study comes at a time when bank valuations are a serious concern, with 75% of bank equity traded below a price-to-book ratio of 1.00 in 2022. BCG suggests that banks can increase their valuations by adopting a new approach that involves strategic changes, new partnerships, consolidation, simplified operations, and embracing a platform-based organization. Governments and regulators will also play a role in establishing a vibrant future banking industry. BCG emphasizes the importance of state-run bodies supporting banks without compromising systemic stability and introducing measures to enhance the value of banks in their jurisdictions. The report also highlights the need for collaboration between regulators and banks to navigate increased capital requirements and consumer-protection rules. On a technological front, BCG emphasizes the importance of banks adopting fintech capabilities to streamline their operations and increase productivity. Banks must embrace a digital-first delivery concept, leverage AI technologies, and make portfolio decisions that reduce exposure to low-return asset classes and invest in areas of strategic growth.