When will the economy return to its 2019 level and trajectory of growth?
About the Report:
Ten months into the COVID-19 crisis, the world has learned a great deal about the disease and the novel coronavirus that causes it. But the knowledge has come at an extraordinary cost: more than 67 million cases worldwide and 1.5 million lives lost. We have also learned more about how to control the disease.1 But that knowledge too has been hard-won: tens of millions are out of work, a global recession has descended, and trillions in global GDP have already vanished. These extraordinary sacrifices may be starting to pay off. Hopes are growing for COVID-19 vaccines. New therapeutics are also showing promising results. Manufacturing and distributing these products worldwide will be a significant challenge, but there is no mistaking the change in sentiment. People are daring to hope for an end to the pandemic.
This report will provide a range of possible answers for the global banking industry—some of which are perhaps surprisingly hopeful. Unlike many past shocks, COVID-19 is not a banking crisis; it is a crisis of the real economy. Banks will surely be affected as credit losses cascade through the economy and demand drops. But the problems are not self-made. Global banking entered the crisis well-capitalized and is far more resilient than it was 12 years ago. Our latest research indicates that, in almost all COVID-19 scenarios, the vast majority of banks should survive. Further, we expect that most institutions can regain their 2019 ROE within five years, provided they are willing to do the hard work necessary on productivity and capital management. The farsighted among them will do even better. Such banks can capitalize on some deepseated and accelerating trends to rethink their organization, business model, and reason for being and to set themselves up for long-term success.