GLOBAL BANKING SURVEY: Global consolidation

By 2012, the world’s banks will be managing profitability and growth under significantly higher capital, risk, liquidity and balance sheet constraints. They will also be competing with some strong emerging-market players—banks from Brazil, Russia, China and India that have performed better during the current crisis and that will leverage the higher growth of their domestic and regional markets over the next three years to consolidate their strengths.

To be successful, all players will need to redefine their business scope—bolstering core businesses and finding optimal exit strategies for the rest. This will demand exceptional post-merger integration skills for the next three years and beyond (see sidebar).

Beyond 2012, we foresee a fundamentally reconfigured banking industry: an environment of technology-enabled banking “ecosystems,” where non-bank players and peer-to-peer networks will compete with mainstream providers to service the needs of ever more demanding consumers. The high performers will be those that can overcome the immediate challenges and maximize the opportunities presented by the dramatically changed banking landscape of 2012.

In the more distant future, the new banking virtues—sustainable profitability, renewed customer-centricity and a more realistic approach to risk—will be more important than ever.

Area 2008 2012
Capital •    Lower capital ratio 

•    Low cost of

• Higher capital ratio
equity • Higher cost of equity
• Securitized assets • On-balance sheet assets
Risk • Low market / credit risk premiums • Higher risk premiums
• Basel II Accords, International • Counter-cyclical provisions
Accounting Standards—pro-cyclical • Regulated risk derivatives
• Innovation in risk derivatives
Assets • High leverage / rapid expansion • Lower leverage
• Off balance sheet / innovation • Higher risk premiums / returns
• Low yield / ROA • Transparency
Liabilities • Reliance on wholesale funding • Focus on retail deposits
• Low cost of retail deposits • Wholesale funding costs rising
Liquidit
y • High market liquidity • Higher liquidity reserves
• Low average cost of funds • Counter-party risk focus
Return on equity • Thin capital / high leverage • Higher capital / lower leverage
• High performers (20-25%) • High performers (10-15%)
• Reputation and capability based,
Growth model • Leverage based core

* Pro-cyclical: The regulatory system magnifies the impact of the business cycle by allowing capital requirements to fall in periods of economic growth and strong credit quality, and rise when credit quality deteriorates. Counter-cyclical: The regulatory system requires banks to hold capital or make additional provisions against default in good times to protect against losses in bad times.

Source: Accenture analysis

Representative APR 391%

Let's say you want to borrow $100 for two week. Lender can charge you $15 for borrowing $100 for two weeks. You will need to return $115 to the lender at the end of 2 weeks. The cost of the $100 loan is a $15 finance charge and an annual percentage rate of 391 percent. If you decide to roll over the loan for another two weeks, lender can charge you another $15. If you roll-over the loan three times, the finance charge would climb to $60 to borrow the $100.

Implications of Non-payment: Some lenders in our network may automatically roll over your existing loan for another two weeks if you don't pay back the loan on time. Fees for renewing the loan range from lender to lender. Most of the time these fees equal the fees you paid to get the initial payday loan. We ask lenders in our network to follow legal and ethical collection practices set by industry associations and government agencies. Non-payment of a payday loan might negatively effect your credit history.

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