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The old one-two: Banks could lose $3.7 trillion in revenue over five years

The COVID-19 crisis will present a two-stage problem for banks. First will come severe credit losses, likely through late 2021. Then, amid a muted global recovery, banks will face a profound challenge to ongoing operations that may persist through 2024, or beyond. In our base-case scenario, $3.7 trillion of revenue will be forgone over five years.

For banks, the difficult road ahead will have two stages.

For banks, the difficult road ahead will have two stages.

In the recession period from 2007 to 2009, global revenues were approximately flat at $3.4 trillion.

In scenario A1, two stages are shown.

Stage 1 is a recession period from 2020 to 2021.

  • The global revenues trend line would otherwise have risen from $5.5 trillion to $6 trillion.
  • Total crisis impact in this stage is $2.9 trillion: $1.0 trillion in forgone revenue and $1.9 trillion in loan-loss provisions.

Stage 2 is a recession period from 2022 to 2024.

  • The global revenues trend line would otherwise have risen from $6 trillion to $7.1 trillion.
  • Total crisis impact in this stage is $3.5 trillion: $2.7 trillion in forgone revenue and $0.8 trillion in loan-loss provisions.

Notes

Note: Chart shows year-end data.

Source: McKinsey Panorama Global Banking Pools

McKinsey & Company

To read the report, see “McKinsey’s Global Banking Annual Review,” December 9, 2020.