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Global banking outlook 2012-2013 - The Americas - EY - Global

Global banking outlook 2012-2013

The Americas

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The cost of infrastructure investments to support and comply with regulatory changes will constrain the ability of many banks to invest in growth.

USA

The recovery continues but not without risks.

With less exposure to the Eurozone, the overall outlook for US banks is better than for their European counterparts but there are still some headwinds to face.

In retail banking, consumer activism will continue to be a feature of the landscape as banking is expected to remain highly politicized during the 2012 election cycle. Additionally, the impact of mortgage and credit card reforms and the Durbin Amendment will be extensive, and will be multiplied by the launch of the Consumer Financial Protection Bureau (CFPB). Mortgage-related and other litigation also will continue to distract and challenge some banks while it remains unclear what impact the “Occupy” movement will have.

Within corporate and investment banking, as banks adapt to the new regulatory requirements, new models and Wall Street expectations are expected to emerge. Subject to final wording, the Volcker Rule may impact a global bank’s revenues while Basel III is expected to make banks’ market risk positions at least three times as costly in terms of capital.


USA 2009 2010 2011* 2012 forecast 2013 forecast
        Feb 2011 Feb 2012 Feb 2011 Feb 2012
Real GDP growth -3.5 3.0 1.7 3.5 2.3 3.6 2.5
Policy interest rate 0.2 0.2 0.1 1.2 0.1 3.2 0.1
Unemployment rate 9.3 9.6 9.0 8.2 8.4 7.2 7.5
Inflation -0.3 1.6 3.1 2.2 1.9 2.5 2.1

* Latest estimates used where final figures not yet available. Forecasts for 2012 and 2013 made in February 2011 and February 2012. Source: Oxford Economics


Canada

With lower levels of leverage and complexity embedded in their banking system, the Canadian regulatory focus is divided between implementing relevant G20 objectives and managing emerging extraterritorial impacts of regulation written in other countries, including implications of the Volcker Rule on Canada’s ability to manage liquidity in its own government debt.

As the impact of the new regulatory environment and risk management requirements become clearer, Canadian banks will also see cost pressures increase significantly.

Retail banking is expected to continue to be profitable but, in a highly mature market, growth will primarily come from taking market share or selective expansion abroad – mainly the US and Latin America.

At the same time, while product innovation hasn’t been a major feature of the market, we may see more – especially technology-related advances as mobile banking and mobile payments activity expands.


Canada 2009 2010 2011* 2012 forecast 2013 forecast
        Feb 2011 Feb 2012 Feb 2011 Feb 2012
Real GDP growth -2.8 3.2 2.3 3.0 2.0 3.6 2.6
Policy interest rate 0.4 0.6 1.0 2.9 1.0 4.3 1.2
Unemployment rate 8.3 8.0 7.5 7.4 7.6 7.1 7.3
Inflation 0.3 1.8 2.9 1.8 2.0 2.5 2.1

* Latest estimates used where final figures not yet available. Forecasts for 2012 and 2013 made in February 2011 and February 2012. Source: Oxford Economics


Brazil

Brazil has not completely escaped the wider economic slowdown as its focus has switched from fighting inflation to stimulating growth.

The domestic banking landscape is primarily composed of a mix of state-owned, independent and well-established foreign-owned banks. As a result, international banks without a long track record will be challenged to develop a credible presence in the market. This is especially evident as local banks are expected to continue to expand within the region and likely strengthen relationships with local businesses and investors from many European companies’ domestic banks.

Like other markets, banks in Brazil are grappling with the new regulatory environment, as new requirements are introduced locally. These regulations, coupled with increased competition, will put further pressure on costs.

On the consumer side, banks serving a growing middle class will see increased demand for credit and greater expectations for more sophisticated wealth management practices.


Brazil 2009 2010 2011* 2012 forecast 2013 forecast
        Feb 2011 Feb 2012 Feb 2011 Feb 2012
Real GDP growth -0.3 7.5 2.9 5.5 3.5 5.2 5.2
Policy interest rate 8.8 10.8 11.0 10.0 9.5 8.7 8.9
Unemployment rate 7.9 6.4 5.5 5.6 5.8 5.3 5.2
Inflation 4.9 5.0 6.6 4.3 5.4 4.1 4.7

* Latest estimates used where final figures not yet available. Forecasts for 2012 and 2013 made in February 2011 and February 2012. Source: Oxford Economics




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Global banking outlook 2012-2013

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  • Steven Lewis
    Global Banking & Capital Markets Lead Analyst
    Ernst & Young LLP

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