China is expected to overtake the US and
become the largest banking economy in the world by 2023 – 20 years
earlier than pre-financial crisis projections, according to the
latest PricewaterhouseCoopers (PwC) report.
PwC’s team projects domestic banking assets in
China to amount to over $30 trillion by 2030.
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In comparison, US domestic banking assets are
expected to stand at under $30 trillion by 2030.
India’s domestic banking assets are projected
to be almost $10 trillion in 2030, by which stage PwC expects the
country to have almost the same level of domestic banking assets as
Japan.
E7 banking assets take over those of
G7
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By GlobalDataThe PwC Banking in 2050 found that India’s banking
industry has particularly strong long-term growth potential and
could overtake Japan to become the third largest domestic banking
sector by 2035, if it continues to pursue growth-friendly policies,
such as investing in infrastructure and opening up its markets to
increase competition.
The report also found that China and
India could have a combined share of around 35.1% of global banking
assets by 2050 – compared with 14.8% for the US at the same
period.
Overall, the report highlighted that the
combined domestic banking assets of the E7 emerging economies of
China, India, Brazil, Russia, Mexico, Indonesia and Turkey are
forecast to exceed those in the G7 countries by around 2036 – ten
years earlier than PwC had predicted before the financial
crisis.
2008 financial crisis affects G7 more
Analysis conducted by PwC in 2007 projected
that E7 domestic banking assets would overtake the G7, which
comprises the US, Japan, Germany, the UK, France, Italy and Canada,
in 2046.
But PwC has now brought forward this
projection by a decade to reflect the aftermath of the financial
crisis, during which the G7 nations were much more severely
affected than the E7.
The analysis is based on GDP projections,
domestic banking projections and banking profitability projections
and assumes governments follow broadly growth-friendly policies and
that no catastrophic events throw growth permanently off track.
PwC’s chief economist John Hawksworth said
there are a range of M&A options available to both emerging and
developed market banks, and a mixture of consolidation can be
expected with foreign banks entering emerging markets and banks
from the E7 expanding overseas.
“The E7 doesn’t need the G7 for capital,
decision making or consumers so the established economies will have
to make a strong case to convince new economy policy makers of the
benefits of inviting foreign competition in,” noted Hawksworth.
