Digital excellence often translates into improved financial performance, according to a McKinsey study of 20 digital leaders and 20 digital laggards in retail banking between 2018 and 2022. The research by senior partners Eric Lamarre, Kate Smaje, and Rodney Zemmel finds that digital leaders fared better than technological laggards when it comes to P/E ratios, total shareholder returns, and return on tangible equity.
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Three graphs illustrate the disparities between digital leaders and laggards in the retail-banking industry across different metrics. The first graph, a line chart, compares the price-to-equity ratios for 2018 and 2022. Digital leaders boast a significantly higher ratio than the laggards for both years, though both groups show a decrease from 2018–22. The second graph, a bar graph, presents the total return to shareholders from 2018–22, represented as a percentage. Digital leaders show a return of 8.1%, while laggards yield a return of 4.9%. The third graph, another line chart, contrasts the return on tangible equity as a percentage for 2018 and 2022. Here, digital leaders again markedly surpass the laggards. In contrast to the first chart, both groups exhibit an increase in this metric from 2018–22.
Footnote 1: “Leaders” refers to the top 20 retail banks from 2018–22.
Footnote 2: “Laggards” refers to the bottom 20 retail banks from 2018–22.
Source: S&P Global; Corporate Performance Analytics by McKinsey.
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To read the article, see “Rewired to outcompete,” June 20, 2023.
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