Wholesale banking has been undervalued yet delivered impressive results through the pandemic, according to a new report released by Oliver Wyman and Morgan Stanley.

Titled ‘Striving to Sustain Returns’, the wholesale and transaction banking report details that markets and investment banking were more resilient than anticipated – benefitting from a decade of structural change alongside policy support. The resilience of the markets and banks has allowed the institutions to offset declines in interest-rate driven businesses.

As wholesale banking prepares for the post COVID-19 recovery phase, the report also looks at how management teams can position for higher returns going forward.

“CIB businesses demonstrated resilience through the economic stress of the pandemic, delivering the best year in a decade with revenues up 7% YoY and RoE of 12%. Within the Middle East and North Africa (MENA) region, CIB businesses drive 60-80% of profitability on average.” saidRajiSouag, Partner at Oliver Wyman Middle East.

“Given increasingly positive signals from policymakers of economic recovery In the GCC, the time may now be right for another wave of consolidation in the sector. To lift returns even higher, wholesale banks need to unlock the value of Transaction Banking with a shift to recurring fees, services-based business models, and enhanced disclosure,” Souag added.

Payment volumes are expected to grow at 15-20% over the next five years for key MENA markets with the landscape of bank and non-bank players evolving rapidly. Payment assets are also high on the agenda for a number of leading MENA banks.As such, the report outlines actions that management teams can take to unleash growth and fend off the risk of disintermediation by non-bank players in Transaction Banking, including growing, optimising and integrating operations.

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