BCG study reveals global corporate banking industry destroyed $50 billion in value in 2002
26-Nov-2003 :
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Canadian banks outperformed most of their global counterparts in 2002 but face a number of key issues as the corporate banking industry is at the cusp of major changes, finds a report released today by The Boston Consulting Group.
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| Consulting-Times E-zine
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While overall, the global corporate banking industry destroyed US $50 billion in value last year, most segments of Canadian corporate banking actually generated value in 2002, according to the report, The Path to Value Creation: Global Corporate Banking 2003.
"On average, Canadian banks performed better – and in some cases markedly better – than the global industry," says Juergen E. Schwarz, vice president and director of The Boston Consulting Group and lead author of the report.
"However, performance differs significantly by bank and by client segments.
"There are important lessons Canadian banks can take from this work to ensure they don't suffer the same fate as many of the world's other banks – especially regarding large cap clients and international ventures."
The report is the first of its kind and draws insights from a comprehensive study that includes a recent survey of the performance of 65 of the world's large corporate banks. This group included more than 40 of the world's top 100 banks measured by tier-one capital. They represent more than half of the top 100's market capitalization.
The report addresses common myths about the corporate banking market. For example, while many of the bank executives interviewed cited the attractiveness of the large-cap company segment, the study reveals that it is the least profitable corporate business for banks.
According to the report, the key to success in today's economy is for many of the players to retrench to their profitable domestic markets, and shift their focus to more attractive small and midsize clients. Accordingly, they should adapt their business models and service approaches to the economics of those segments. As a result, few players would compete internationally for large corporate and multinational company business. The most successful competitors would have world-class fee products and capabilities that allowed them to achieve high returns on equity.
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