A decade has passed since 2007, the year sub-prime loans began to default, signalling the start of the financial crisis which shook the world within months of its beginning. Governments have changed, foreign exchange rates are back to pre-2007 era, real estate rates have stabilized, jobs are back but the banking sector is still dealing with the aftershocks and it still remains under intense public and political scrutiny.
The very memory of 2007-08 sends shivers down bankers across the globe
So, the question that remains after 10 years since world’s largest banks began to feel the tremors that would ultimately lead to their end, what exactly is the future of banking?
Today’s Needull, a recent article from The Economist, sums it up all, as it looks at the various changes triggered by this financial apocalyse, over the decade.
So have the banks at last put the crisis behind them? This special report will argue that many of them are in much better shape than they were a decade ago, but the gains are not evenly spread and have further to go. That is particularly true in Europe, where the banks’ recovery has been distinctly patchy. The STOXX Europe 600 index of bank share prices is still down by two-thirds from the peak it reached ten years ago this month. European lenders’ returns on equity average just 5.8%.
America’s banks are significantly stronger. In investment banking, they are beating European rivals hollow. They are no longer having to fork out billions in legal bills for the sins of the past, and they are at last making a better return for their shareholders. Mike Mayo, an independent bank analyst, expects their return on tangible equity soon to exceed their cost of capital (which he, like most banks, puts at 10%) for the first time since the crisis.