Source page: McKinsey & Company
Commentary
Banking's eroding economic value
Banking
December 5, 2024 – Despite banking experiencing the two best years since before the Great Recession, the industry has recently seen a substantial decline in its valuation relative to other industries. Senior partner Asheet Mehta and coauthors find that as of 2023, the banking industry had the lowest price-to-book ratio, at 0.9. This valuation suggests the market may anticipate that banking will erode economic value as a whole, for various reasons. For example, banks might not be able to count on raising productivity, and improvements in margins may not be able to come from more cost-cutting measures.
To read the report, see “Global Banking Annual Review 2024: Attaining escape velocity,” October 17, 2024.
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Visual form
Mixed chart with a two-line time-series comparison above a ranked bar chart.
Layout / body structure
The visual is split into two sections. Read the top panel first to compare the price-to-book ratio for the global banking industry against all other industries from 2003 to 2023, then read the bottom ranked bar chart to compare 2023 industry price-to-book ratios across sectors.
What is being compared
It compares banking valuation against the rest of the market over time and then compares banking against a wider cross-industry ranking in 2023. The top chart emphasizes the growing discount, while the bottom chart shows where banking sits in the broader industry league table.
Measurement system
Both panels are measured in price-to-book ratio multiples. The top chart uses a shared time axis and two lines, while the bottom chart uses one value bar per industry for the 2023 snapshot.
Visible structure inside the graphic
The top panel contains two lines with a shaded gap between them, highlighting the widening discount between banking and other industries. The lower panel is a descending set of vertical bars across industries, with the global banking industry at the far right and highlighted as the smallest bar.
Main takeaway from the visual
The visual shows that capital markets assign banking a persistent and increasingly severe valuation discount relative to other industries. The top panel’s gap widens across time, and the bottom panel places banking at the bottom of the 2023 industry ranking rather than in the middle of the pack.
Key standout values or extremes
The top chart marks a roughly 30 percent discount near the left side of the period and about a 68 percent discount by 2023, when banking sits near 0.9 times price-to-book and all other industries sit around 2.8 times. In the 2023 bar chart, technology, media, and telecom lead at about 4.7, pharmaceutical and medical products reach about 4.5, and global banking industry is the lowest at 0.9.
Controls / sequence, when applicable
This is a static chart image with no in-chart controls to operate.
Companion media, when applicable
There is no separate companion audio or video; the chart image is the full visual on this page.