Rising interest rates: Bank profitability is at its highest level since the financial crisis

According to an analysis, banks around the world are more profitable than they have been since 2007.

In the current year, McKinsey expects business to improve overall for the industry as well as increasing investment income for investors.

However, in its "Global Banking Annual Review" published on Thursday, the management consultancy also points to increasing challenges, for example as a result of the weakening economy.

In the current year, the average return on equity for banks around the world is calculated to be between 11.5 percent and 12.5 percent.

The industry last reached this level before the recent financial crisis.

McKinsey explained the strong performance in 2022 primarily with significantly higher profit margins thanks to the rise in interest rates.

After years of zero and negative interest rate policies, large central banks such as the Fed in the USA and the European Central Bank (ECB) have initiated a turn towards higher interest rates.

According to the calculations, financial institutions will increase earnings – i.e. total income – by 345 billion US dollars to 6.5 trillion dollars (around 6.3 trillion euros) in 2022.

With the exception of investment banking, growth can be seen in all business areas.

"Even if European banks continue to lag far behind institutions in the USA and Asia in terms of profitability, the industry will see a significant increase in return on equity across the board in 2022," summarized Max Flötotto, head of banking consulting at McKinsey in Germany and Austria. together.

Despite the current upswing due to higher interest rates, the management consultancy sees further need for restructuring in the banking sector.

"In the event of a prolonged recession, we estimate that global banks' return on equity could fall to 7 percent by 2026 - and below 6 percent for European banks," the analysis reads.

"Banks need to take bold steps now to build short-term resilience and lay the foundation for long-term growth." Cost management and cleaning up balance sheets count among the consultants, as does building a technological infrastructure "that can withstand cyberattacks."