The International Monetary Fund has identified nine banks that may struggle to report a profit on par with peers in the coming years, according to the body's biannual Global Financial Stability Report released Wednesday, Oct. 11.
Citigroup Inc. (C) , Barclays PLC (BCS) , Deutsche Bank AG (DB) , Société Générale SA (SCGLY) , UniCredit Group SPA (UNCFF) , Standard Chartered PLC (SCBFF) , Sumitomo Mitsui Financial Group (SMFG) , Mizuho Financial Group (MFG) and Mitsubishi UFJ Financial Group (MTU) are all likely to deliver subpar profits in the medium-term, the IMF said.
The consensus among private sector banking analysts was for a return on equity of less than 8% in 2019 for each of the nine banks the IMF identified, according to The Wall Street Journal. If banks don't earn above 8% for cost of equity, they are unable to maintain consistent profits, the IMF has said in previous reports. Without meeting that threshold, banks will struggle to build capital.
The group of nine banks represents about $47 trillion in assets, or about one-third of global banking loans and assets. "About a third of banks by assets may struggle to achieve sustainable profitability, underscoring ongoing challenges and medium-term vulnerabilities," the IMF said.
But despite the nine banks on track to lag the rest of the pack, the IMF said the largest banking institutions have become "more resilient since the crisis with stronger capital and liquidity."
The report comes as representatives and finance ministers from 189 countries are gathering in Washington for the IMF and World Bank's annual meetings.
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