2022 Global Banking Review and the Factoring Industry
This important finding ought to be the mantra for all of us in the global factoring industry as we enter what is likely to be a very challenging economic environment in 2023. When we focus first on providing value to our SME clients, we incrementally build trust and protracted client retention. I have often spoken on the fact that one the secrets to running a successful business enterprise is to select very carefully whom we serve: when we do and then serve well, we are rewarded with client retention that drives long term profitability and value.
A second key takeaway for me from the McKinsey research was that traditional banking remains (relative to other financial firms) a less than attractive investment in terms of overall valuation in global equity markets. ?There was a wealth of information and data on the overall performance of global banks in the McKinsey research that I have only summarized below.
As can be seen on the Exhibit from the McKinsey research, return on equity or “ROE” for the global banking industry rebounded in 2022 to levels in the 12%+/- range overall. While materially higher than the 8% annual levels recorded in the “flat decade of the period 2010 to 2020”, it still is significantly behind the 16%+ average ROE seen in the golden age of banking (2000 to 2008).?
Source: McKinsey & Company