Opinion | Do banks stand a chance against tech giants?
Technology companies are steadily moving into territory once dominated by banks, and they won’t stop at payments and lending platforms
The average net interest margin of banks got squeezed when the US Federal Reserve and European Central Bank started cutting interest rates after the 2008 financial crisis. The stock market valuation of the banking industry took a beating with prospects of a slower economy, threats of more non-performing loans and heavy overhead costs.
According to McKinsey, cumulative market capitalisation of the 200 largest banks at the end of 2019 had a price-to-book valuation of between 0.8 to 1.2. Meanwhile, the seven largest Big Tech companies had price-to-book valuations above 5, with both groups valued at roughly US$6 trillion in market cap.
