SPECIAL REPORT COVID-19: THE IMPACT
Building a contingency plan Speaking to Banker Middle East, Godfrey Sullivan, Managing Director & Partner at Boston Consulting Group, tells us what to expect in the months to come and how to strategise for it
C
an you give us the best and worst-case scenarios for the financial services sector in this current situation?
There are, of course, many unknowns surrounding the COVID-19 crisis, the first of which is the ultimate impact on human health across the world, and it remains impossible to say how far and wide it will spread before it runs its course. Financial institutions are facing a broad range of operational issues, including how to operate branches if client traffic significantly slows, how to operate trading floors, how to optimise investment management in volatile markets, and how to cope with the profitability hit caused by lower interest rates. The best-case scenario is that the global health community works together efficiently and effectively to find a solution to the crisis in the near future. In terms of impact on the performance of financial institutions, the latest estimates at a global level, even with a significant degree of approximation, show a strong impact. Profitability may drop by 40 to 60 per cent, the cost-to-income ratio may increase by 15 percentage points, margins may decrease by more than 20 per cent, and non-performing loans may surpass 10 per cent.
“FINANCIAL INSTITUTIONS ARE FACING A BROAD RANGE OF OPERATIONAL ISSUES, INCLUDING HOW TO OPERATE BRANCHES IF CLIENT TRAFFIC SIGNIFICANTLY SLOWS, HOW TO OPERATE TRADING FLOORS, HOW TO OPTIMISE INVESTMENT MANAGEMENT IN VOLATILE MARKETS, AND HOW TO COPE WITH THE PROFITABILITY HIT CAUSED BY LOWER INTEREST RATES.” Godfrey Sullivan
— Godfrey Sullivan
12
BANKER MIDDLE EAST | APRIL 2020 | ISSUE 229
