Global management consulting firm McKinsey & Co has released a report detailing that the traditional Wall Street model is “no longer an option.”
(NEW YORK, NY) Despite slashing billions in costs and retrenching from key businesses since the financial crisis, Wall Street banks still have not done enough to repair and restructure, according to a new report.
McKinsey & Co on Wednesday released an annual report about banks, saying Wall Street firms continue to suffer from weak profits, high costs and strategic uncertainty.
“The inescapable reality is that the industry’s restructuring efforts to date have failed to produce sustainable performance,” the report said. “A more fundamental change is required, based on the realization that for most banks, the traditional model of global capital markets and investment banking is no longer an option.”
The top 10 global banks in particular are struggling to adapt to the post-financial crisis environment, as they grapple with high operating costs, low interest rates and the key fixed income trading business under revenue pressure.
These firms posted a combined return on equity of 7 percent in 2015, below the 10 percent minimum that analysts typically expect banks to make to meet their cost of capital.
Capital market and investment banking revenues have declined for the top 10 banks since 2012 by 10 percent to $144 billion. These firms have lost share to regional and local banks, which have seen their revenue rise 14 percent over the same time period.
“The road to a sustainable future remains open… but only if they make tough choices and bold actions now,” the report concluded.
Full article: Report: Traditional Wall Street model “no longer an option” (TruNews)