Investment Bank Consolidation Likely Amid Virus Fallout: Report
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A “new wave of consolidation” among global investment banks could be triggered by the coronavirus pandemic, according to a new report byOliver Wyman andMorgan Stanley.
Some banks may find their lack of scale and the short term pressure “too acute” to survive the crisis, particularly in Europe where returns are lower compared to bigger, more profitable global banking rivals. A spate of upcoming CEO successions at banks, a “recent shift in tone” among European policymakers and regulators, and banks’ current discounts to asset values could also prompt consolidation, the report states.
Any potential consolidation comes at a time when all global investment bank earnings are under severe pressure because of the virus. Analysis in the report shows that even in a “rapid rebound” recession, lasting up to six months, there could be a 100% decline in earnings this year.
In a worst case “deep global recession” scenario, lasting a year or longer, earnings could fall by 277% and there could be significant losses for weaker banks. The report states that credit losses could surge to between $200 billion and $300 billion, compared with $30 billion to $50 billion if a rapid rebound occurs.
29,861 in U.S.Most new cases today
-18% Change in MSCI World Index of global stocks since Wuhan lockdown, Jan. 23
-1.013 Change in U.S. treasury bond yield since Wuhan lockdown, Jan. 23