December 2023Five big shifts shaping a new world for corporate and investment banksThis report is a collaborative effort by Fuad Faridi, Rushabh Kapashi, Matthieu Lemerle, Vince Marriott, and Ammar Zahid, representing views from McKinsey’s Financial Services Practice.Cover image © Michael Lee/Getty ImagesFuad Faridi is a partner in McKinsey’s New York office, where Rushabh Kapashi is a senior partner and Vince Marriott is an associate partner. Matthieu Lemerle is a senior partner in the London office, and Ammar Zahid is an associate partner in the Miami office.Table of contentsExecutive summary 1CIB today: Varied performance across segments of one 4Five big shifts driving a new operating environment and how to navigate them 14The way forward 34Acknowledgments 37Contacts 37iiiFive big shifts shaping a new world for corporate and investment banks© Philippe LEJEANVRE/Getty ImagesThe performance of the corporate and investment banking (CIB) sector has been positive on aggregate. In 2022, CIB organizations generated $2.9 trillion of revenue and achieved an RoE of about 12 percent at a 54 percent cost-to-income ratio. In doing so, the industry covered its cost of equity after a decade of restructuring following the global financial crisis and more recent pandemic-driven volatility. Those fundamentals have persisted in 2023 despite liquidity issues and other challenges.However, these average figures mask wide variations in performance, with a spread of 700 basis points or more in ROE between the top and bottom performers in any given segment. This variation prompts questions from boards, investors, and regulators—questions made more pointed by the increasing shift of value to nonbanks in direct lending, market making, and wholesale payments.This variation also reflects the underlying complexity of the industry. The unique nature of each organization—in terms of specific clients served, the particular mix of products, the precise geographic footprint, and responses to date to the nonbank threat—means that each should be thought of as a segment of one.In how they approach value creation, each CIB organization must therefore disaggregate its businesses into highly granular underlying client and product franchises. This analysis inevitably reveals underlying pockets of excellence that even the most challenged franchises can use as a foundation for future plans and that the leading franchises can build on to deliver the next wave of growth.But as they develop those plans, all organizations will have to contend with five major shifts that are fundamentally transforming the environment in which they have operated for the past 15 to 20 years. Executive summaryEach CIB organization must therefore disaggregate its businesses into highly granular underlying client and product franchises.1Five big shifts shaping a new world for corporate and investment banks —...
