BCG – To Seize a $7 Trillion Opportunity, Banks Need Bolder Strategies for Serving Customers and Society

Banks are currently facing a challenging environment, with profitability and valuations still below pre-financial crisis levels. However, there is an opportunity for them to increase their valuations and create $7 trillion in value over the next five years. This can be achieved through growth and improving price-to-book ratios. To do this, banks need to focus on creating shareholder value and driving economic growth, as well as financing the climate transition. Banks with business models based on strong customer relationships have higher valuations. While banks currently benefit from rising interest rates, newer competitors face regulatory and investor challenges. Governments expect banks to be leaders in climate transition and corporate social responsibility. However, this transition adds pressure to banks' profitability. Regulators are expected to enforce additional capital and liquidity requirements, necessitating loan-portfolio optimization and investments in data infrastructure. To ensure banking profitability without compromising stability, regulators and governments should adopt new agile regulations, encourage consolidation, and promote industry utilities and digital assets. By embracing these strategies, banks can seize the $7 trillion opportunity and create sustainable value.