An economic report by management consulting company McKinsey expects German bank profits to grow thanks to high interest rates, but they will be lower than the profits of corresponding international banks.
In the report published, Wednesday, McKinsey assumes an increase in the average return on equity for German bank shareholders after taxes to 5.4%, compared to 3.88% last year.
It’s noteworthy that return on equity is the relationship between profits and working capital in the company and shows how efficiently the company uses funds.
Despite the expected increase in returns, the return for German banks will remain lower than the expected rate for European banks, amounting to 7%, and lower than the average return for global banks as a whole, as McKinsey expects it to be 13% during the current year.
According to estimates, the average return on equity in global banks during the current year will increase by about a percentage point over last year and will exceed the average long-term return since 2010, which amounts to 9%.
According to a McKinsey spokesman, data from the 1,000 largest banks in the world was analyzed to arrive at these estimates.
A separate analysis of the returns in German banks was also carried out based on data from the German Central Bank.
According to Max Floetotto, head of the banking consulting sector for the Germany and Austria region at McKinsey, said that despite the inability of German banks to narrow the gap with the global average, they recorded an increase in their profitability.