The pandemic bill for banks: Severe credit losses, operation turbulence

The 10th edition of McKinsey’s Global Banking Annual Review says the pandemic will present a two-stage problem for banks — first, severe credit losses, likely through late 2021, which almost all banks and banking systems are expected to survive; then, amid a muted global recovery, banks will face a profound challenge to ongoing operations that may persist beyond 2024.

Depending on the scenario, $1.5 trillion to $4.7 trillion in cumulative revenue could be forgone between 2020 and 2024.

 

In McKinsey’s base-case scenario, $3.7 trillion in revenue will be lost over five years — the equivalent of more than a half year of industry revenues that will never come back. And unlike many past shocks, the Covid-19 crisis is not a banking crisis, but one of the real economy. The bright spot is that global banking entered the crisis well capitalised and is far more resilient than it was 12 years ago.