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Lenders could roughly double their current valuations if they
pursue growth and improved price-to-book ratios despite
obstacles, the consultant said.
"The largest driver of pessimism about the banking sector has
been the significant drop in profitability," BGC said.
About 75% of bank stocks had price-to-book ratios below 1 in
2022, while price-to-earnings multiples were almost half of 2008
levels. Meanwhile, shareholder returns on bank stocks have
lagged those of major market indexes since the crisis, and the
gap is widening.
Even if they invest in productivity and radically simplify their
businesses, bank profits will remain under pressure from higher
capital requirements and increased competition from newer
players such as fintechs, BCG said.
"Banks are not likely to return to the profitability levels and
valuations that existed prior to the global financial crisis,"
the consultant said.
(Reporting by Lananh Nguyen in New York; Editing by Richard
Chang)
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