The document summarizes banking industry performance in 2010 following the financial crisis. Key points include: - Global banking market capitalization increased 10% in 2010, recovering further from the crisis but remaining below pre-crisis levels. - Total shareholder returns for banks fell from 47.1% in 2009 to 6% in 2010, below the all-industry average, with emerging markets performing best. - Five of the top ten largest banks by market cap were from emerging markets, including four from China, highlighting the strength of emerging market banks. - For the first time since the crisis, all major banking markets were profitable, with Switzerland having the highest returns, though profitability declined in Spain and was

1. Creating Value in Banking 2011
Settling into the New Postcrisis Equilibrium
March 3, 2011

2. Summary (part 1)
The global banking industry’s market capitalization increased by 10 percent in 2010,
following a 55 percent increase in 2009
• 2010 was a tale of two halves: the industry’s market capitalization declined by 9 percent over
Market
the first six months before climbing 22 percent in the second half
capitalization
• At $7.1 trillion, the industry’s market capitalization remained well shy of the precrisis peak—
though the gains made since the start of the crisis have been impressive
The banking industry’s total shareholder return (TSR) fell from 47.1 percent in 2009 to 6.0
percent in 2010—9 percentage points below the all-industry average
• Banking TSRs declined in every region except the Middle East, which had the third-highest
regional TSR
• The highest banking TSRs were in the emerging markets of Latin America and Central and
Eastern Europe
Total • The reversal in performance was striking. The banking industry’s TSR went from being the
shareholder third highest in 2009 to the third lowest in 2010
return Among ten major banking markets, Canada continued to have above-average TSR
performance, but the U.K. and U.S. sectors were surprisingly strong
• None of the other ten major banking markets achieved positive—let alone above-average—
TSRs in 2010
• The performance of U.S. banks was surprising, but it was likely boosted by nonrecurring
events—namely the withdrawal of money from loan loss reserves
• Spain and Italy had the weakest banking TSRs among the major markets, largely due to
concerns over public debt
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3. Summary (part 2)
Five of the ten largest banks in the world—measured by market capitalization—were from
emerging markets
• Four of the ten largest are based in China—including Agricultural Bank of China, which had
its IPO, the world’s largest, in mid-2010. Itaú Unibanco, which was formed by the merger of
World’s Banco Itaú and Unibanco, ranked tenth, underscoring the strength of Brazil’s economy and
largest banks
banks
• In all, 11 of the world’s 30 largest banks were either based in or focused on emerging
markets
• For the second year in a row, each of Australia’s Big Four banks placed in the top 30
For the first time since the crisis began, all ten major banking markets were profitable
• Switzerland had the highest average after-tax ROE, at 16 percent, followed by Canada and
Australia; bank profitability improved in most markets but declined in Spain and was relatively
flat in Italy
• The biggest improvements in ROE were in Japan and Switzerland, at 17.5 and 11.1
percentage points, respectively, followed by the U.S., at 6.3 percentage points
Profitability
Banks made less profit than they did before the crisis, while having a much larger
foundation of equity
• The average after-tax ROE doubled from 4.8 percent in 2009 to 9.6 percent in 2010
• The industry's profits soared by more than 130 percent, from $166 billion to $386 billion
• At the same time, the industry's total equity increased by 8.6 percent, to about $4.2 trillion
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4. Exhibit 1. The Banking Industry’s Recovery Continued at a
Slower Pace in 2010
Total market capitalization, Quarterly change in total market
2005–2010 ($trillions) capitalization, 2009–2010 ($trillions)
CAGR1 1.3%
26.8% 2.7% −52.0% 54.9% 10.0% 4.2% −13.8% 17.0% 4.8%
10 10
8.7
8.4
8 8
7.1 0.3 7.1
6.7 0.3 -0.9 1.0
6.4 6.4
6 6
4.2
4 4
2 2
0 0
2005 2006 2007 2008 2009 2010 Year-end Q1 2010 Q2 2010 Q3 2010 Q4 2010 Year-end
2009 2010
End-of-year values
Sources: Thomson Reuters Datastream; BCG analysis.
Note: Percentage changes in market capitalization were calculated using complete, not rounded, figures.
1Compound annual growth rate.
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5. Exhibit 2. Banks in Emerging Markets Again Had Outstanding
Performance
1 1
Total shareholder return,1 Total shareholder return by region,1
2006–2010 (%) 2009 and 2010 (%)
−1.9 5.3
7.9
Asia-Pacific3 33.9
47.1 50.3
39.0
9.3
North America4 25.1
21.5 23.8 28.9
15.2 15.0
−9.0
6.0 Western Europe5 21.9
2.3 52.7
22.5
Latin America6 8.5
105.0
Central and 18.4
4.8
Eastern Europe7 100.0
-43.3
15.2
-53.2 Middle East8 4.3
3.6
2006 2007 2008 2009 2010
Percentage of global
Banking industry All-industry average2 2010 2009 banking market
capitalization, 2010
Sources: Thomson Reuters Datastream; BCG analysis.
Note: TSRs were calculated after conversion to U.S. dollars.
1TSR consists of capital gains and free-cash-flow yields. 2Weighted by market capitalization. 3Australia, China, Hong Kong, India, Indonesia, Japan, Malaysia, Pakistan, Philippines, Singapore, South
Korea, Sri Lanka, Taiwan, and Thailand. 4U.S. and Canada. 5EU-15 countries plus Norway and Switzerland. 6Argentina, Brazil, Chile, Colombia, Mexico, Peru, and Venezuela. 7Bulgaria, Cyprus,
Czech Republic, Hungary, Malta, Poland, Romania, Russia, Slovenia, and Turkey. 8Bahrain, Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia, and United Arab Emirates (Abu Dhabi and Dubai).
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6. Exhibit 3. The Banking Industry’s TSR Fell Well Below the All-
Industry Average
1 1
Total shareholder return,1 Total shareholder return,1
2006–2010 per year (%) 2010 (%)
Basic materials 16.1 25.3 -61.5
Consumer goods 9.1 21.8 −15.5
Telecommunications 8.4 13.2 −0.4
Oil and gas 7.9 13.5 −27.4
Utilities 6.9 1.0 −14.7
Industrials 6.6 23.5 −16.4
Technology 4.8 13.3 −49.7
Consumer services 4.4 21.6 −8.5
Health care 3.5 5.0 −16.5
Banking −1.9 6.0 −41.1
All-industry average2 5.3 15.0 −24.1
Change, in percentage points, from 2009 TSR
Sources: Thomson Reuters Datastream; BCG analysis.
Note: All TSRs were calculated after conversion to U.S. dollars based on the respective Thomson Reuters Datastream global industry index (weighted by market capitalization). The TSR for the
banking industry was based on Thomson Reuters Datastream global banking and financial-services indexes.
1TSR consists of capital gains and free-cash-flow yields. 2Weighted by market capitalization.
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7. Exhibit 4. All but Three Major Markets Had Negative TSRs in
2010
1 1
Total shareholder return,1
Total shareholder return,1
2006–2010 per year (%) 2010 (%)
Canada 6.4 11.1 −49.7
Australia 3.2 −3.8 −65.2
Spain −4.2 −24.5 −76.1
U.S. −6.5 7.8 −15.7
U.K. −7.2 8.3 −21.5
France −8.5 −10.5 −84.9
Switzerland −10.0 −5.9 −39.4
Germany −10.5 −4.5 −42.0
Italy −11.3 −24.3 −59.1
Japan −22.8 −3.8 +14.2
Change, in percentage points, from 2009 TSR
Sources: Thomson Reuters Datastream; BCG analysis.
Note: All TSRs were calculated in local currencies.
1TSR consists of capital gains and free-cash-flow yields.
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8. Exhibit 5. Banks That Were Based in—or Focused on—
Emerging Markets Were Prominent
Market capitalization
($billions)
400 Top 10
Commonwealth Bank of Australia (+1)
Mitsubishi UFJ (+1)
BNP Paribas (-6)
Royal Bank of Canada (-3)
Sberbank (+2)
300 ICBC (±0) Lloyds Banking Group (+8)
China Construction Bank (±0) Westpac Banking (-2)
HSBC (±0) Banco Bradesco (+1)
JPMorgan Chase (±0) The Toronto-Dominion Bank (+3)
Wells Fargo (+1) Standard Chartered Bank (+8)
200 UBS (±0)
Bank of China (-1)
Citigroup (+3) ANZ (+3)
Bank of Nova Scotia2 (+9)
Banco do Brasil2 (+11)
Agricultural Bank of China2,3 National Australia Bank (+2)
100 Bank of America (-1) US Bancorp2 (+10)
Itaú Unibanco (+1) American Express2 (+4)
Banco Santander (-4) Bank of Communications (-12)
Goldman Sachs (±0)
0
0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30
Rank by market capitalization1
Market capitalization of the top 30 banks in 2007
Market capitalization of the top 30 banks in 2010
Sources: Thomson Reuters Datastream; BCG analysis.
Note: All market capitalizations are based on figures in U.S. dollars.
1Numbers in parentheses indicate change in rank since December 31, 2009. 2Represents a new entry. 3IPO on July 15, 2010.
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9. Exhibit 6. For the First Time Since the Crisis Began, All Major
Banking Markets Were Profitable
Most profitable banking sectors and universal
1,2 1,2
After-tax ROE, 2006−20101,2 (%) banks, 2010 after-tax ROE1,2 (%)
Switzerland Switzerland 16.0 16.3 UBS
30 Canada
Canada 15.5 19.7 CIBC
Australia
Spain Commonwealth Bank
Australia 15.3 18.6 of Australia
20 U.S.
France Spain 11.3 13.5 BBVA
Germany U.S. 8.7 12.2 US Bancorp
Japan
10
U.K. France 8.3 10.9 BNP Paribas
Italy
Germany 7.0 7.2 Deutsche Bank
0 Japan 6.8 12.8 Mizuho Financial Group
2006 2007 2008 2009 2010
U.K. 6.5 13.8 Standard Chartered Bank
-10 Italy 3.5 6.2 Mediobanca
Country average3
-50
Sources: Thomson Reuters Datastream; Bloomberg; BCG analysis.
Note: When data were unavailable for 2010, calculations were based on Bloomberg consensus forecasts.
1ROE was calculated based on average equity. 2Includes only banks with market capitalizations above $5 billion in the ten major developed markets. 3Average of all banks.
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10. Exhibit 7. Bank Profits Soared and the Industry's ROE
Doubled
ROE1 (%)
1 Equity2 (billions)
2
17.8 22.0% -4.2% 24.5% 8.6%
14.8 4,161
3,832
3,213 3,078
9.6 2,634
3.9 4.8
2006 2007 2008 2009 2010 2006 2007 2008 2009 2010
After-tax profit2 ($billions)
2
1.9% -71.5% 35.3% 131.8%
424 432
386
166
123
2006 2007 2008 2009 2010
Sources: Thomson Reuters Datastream; Bloomberg; BCG analysis.
Note: When data were unavailable for 2010, calculations were based on Bloomberg consensus forecasts. To meet the data requirements of this performance analysis, a subset of the full market
sample was used—378 banks instead of 653.
1ROE = after-tax return on average equity. 2Percentage changes are based on complete, not rounded, figures.
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11. Exhibit 8. Most of the Top-Performing Large-Caps Were
Universal Banks
Top ten large-cap performers
1 1
RTSR,1 2010 (%)
RTSR,1 2006–2010 (%)
Sberbank 12.6 Citigroup 22.6
State Bank of India 10.9 ICICI Bank 20.9
Blackrock 10.6 RBS 15.6
Standard Chartered Bank 7.1 State Bank of India 14.5
Sumitomo Mitsui Financial
Banco do Brasil 6.7 12.6
Group
Commonwealth Bank
4.3 Lloyds Banking Group 12.0
of Australia
China Merchants Bank 3.7 Banco do Brasil 7.9
Goldman Sachs 3.5 Banco Bradesco 5.9
Bank of Nova Scotia 2.0 ANZ 4.8
The Toronto-Dominion Bank 1.0 Hang Seng Bank 3.7
Sources: Thomson Reuters Datastream; BCG analysis.
Note: The sample consists of the 50 largest banks by market capitalization as of December 31, 2010, that had a five-year capital-market history. Banking companies from the Middle East were
excluded from this analysis because of the lack of market indexes. All TSRs were calculated in local currencies.
1Relative total shareholder return (RTSR) adjusts TSR for local market influences.
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12. Exhibit 9. Banks from Emerging Markets Were Prevalent
among Top Mid-Caps
Top ten mid-cap performers
1 1
RTSR,1 2010 (%)
RTSR,1 2006–2010 (%)
Axis Bank 18.6 Grupo Aval 57.1
CIMB Group 11.8 Fifth Third Bank 29.6
T. Rowe Price 11.1 Ameriprise Financial 29.2
HDFC Bank 10.1 HDFC Bank 26.6
T. Garanti Bankasi 9.5 Axis Bank 25.7
HDFC2 8.9 HDFC2 25.5
Grupo Aval 7.6 SunTrust Banks 25.0
PKO Bank Polski 7.2 Banco de Chile 21.1
Bank Mandiri 6.9 DnB NOR 18.1
The Siam Commercial Bank 6.0 Grupo Financiero Inbursa 15.5
Sources: Thomson Reuters Datastream; BCG analysis.
Note: The sample consists of the banks ranked 51 to 100 by market capitalization as of December 31, 2010, that had a five-year capital-market history. Banking companies from the Middle East were
excluded from this analysis because of the lack of market indexes. All TSRs were calculated in local currencies.
1Relative total shareholder return (RTSR) adjusts TSR for local market influences. 2Housing Development Finance Corporation.
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13. For Further Contact
To arrange an interview with the authors of BCG’s study of value creation in banking, please contact
Eric Gregoire at +1 617 850 3783 or gregoire.eric@bcg.com.
About The Boston Consulting Group
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information, please visit www.bcg.com.
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