For the global banking industry, the potential for economic recovery in the near term remains uncertain. The pandemic is set to pose a double-pronged problem for the industry in the months and years to come.
According to the research data analysed and published by Comprar Acciones, the global banking industry is projected to lose $1 trillion in foregone revenue and set aside $1.9 trillion in loan loss provisions (LLPs) by 2021. By 2024, the sector is forecast to suffer a loss of $3.7 trillion in revenue, a 14% drop from pre-crisis projections.
Global Bank Industry Sets Aside $1.15 Trillion as Loan Loss Provisions in Q3 2020
In Q3 2020, banks across the globe set aside $1.15 trillion as LLPs, much higher than the amount set aside throughout 2019.
According to McKinsey, in the coming years, LLPs will surpass those of the Great Recession. During Q1 to Q3 2020, the top 100 banks in North America provisioned $130.9 billion for loan losses. In APAC, the top 100 banks set aside $89.4 billion while in Europe, they set aside $72.2 billion.
Based on a report from SP Global, banks across the globe are estimated to suffer credit losses of up to $2.1 trillion in 2020 and 2021. In 2020, the figure is expected to reach $1.3 trillion, more than double the $603 billion posted in 2019. It will drop to $825 billion in 2021.
On the other hand, Deloitte projects that the average Return on Equity (ROE) for the US banking sector could drop to 5.6% in 2020. But by 2022, it will rebound to 11.7%.
For the top 100 banks in North America, Europe and APAC, estimated ROE could fall by three percentage points to 6.8% in 2020. In North America and Europe, they will not rebound to pre-crisis levels in the near future. But in APAC, they might rebound to 9.2% by 2022.