News Article

British banks underperforming rest of the world

Published 8 June 2012 by

Research into the global banking system indicates that the British banking industry performed badly compared with the rest of the world last year. This is reported in The Telegraph, which quotes research by the Boston Consulting Group (BCG), a global management consulting firm.

Compare the British banking market with that of Indonesia - considered the world's strongest-performing banking market. Over there, the return on shareholders' equity in 2011 was 26%. In Britain it was less than 4%.

The Asian banking market is performing very well. Last year, the banks in China produced returns of 22% on average. The US achieved an average of 8% return on investment.

Since 2007, the banking markets have really changed, reflecting global economic changes. So whereas five years ago, 57 of the biggest banks were based in Western Europe, by the end of last year that number had fallen to 37. Compare that with the emerging Eastern markets. Five years ago 52 of the top 200 banks were in Asia. By last year that number had risen to 60.

Today only two British banks rank in the top 30 global banks, ranked by market value.

Ranu Dayal is a senior partner at BCG and co-produced this study of the global banking market. He puts the success of emerging-nation banks down to two factors: they can tap into a large market of people who have never used banking products before - and there are a growing number of people with plenty of wealth too.

He commented: "Emerging-nation banks are doing better for two simple reasons. First, they are benefiting from the enormous numbers of customers and businesses who, for the first time in their lives, are starting to open bank accounts, take out loans, and participate in other banking interactions. Second, there’s a growing class of affluent and wealthy customers in those populations who help boost banking revenues."

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