The Deloitte Center for Financial Services is forecasting that the average return on equity in the U.S. banking industry could drop to 5.6% in 2020 but then recover to 11.7% in 2022.
“For the banking industry, the economic consequences of the pandemic are not on the same scale as those during the Global Financial Crisis of 2008-10 (GFC), but they are still notable,” Deloitte said in its “2021 Banking & Capital Markets Outlook,” released last month.
The average ROE of the top 100 banks in North America, Europe and the Asia-Pacific region could decline by almost 3 percentage points, to 6.8% in 2020, the report said. “Banks in North America and Europe aren’t expected to recover to 2019 levels anytime soon, with APAC banks potentially only getting near their pre-COVID-19 ROE average level of 9.2% by 2022,” Deloitte said.
“Low rates are expected to keep net interest margins (NIMs) suppressed, creating strong headwinds to banks’ interest income growth.”
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