May 17, 2012
The Economist - Special Report on Retail Banking
"The effect of the debt bubble was more insidious than it appeared at first glance. In encouraging universal banks to build up their investment side, and some retail banks to dabble in exotic instruments that they did not always understand (demonstrating that even boring retail banks can blow up), it made them take their eyes off their bread-and-butter business. Yet basic retail banking was, and remains, their main engine of profitability. McKinsey, a consulting firm, reckons that it accounts for more than half banks’ worldwide annual revenue, which in 2010 amounted to $3.4 trillion (see chart). It has also proved, in the longer run, to be the most reliable generator of consistent profits and high returns on equity. A ranking of the world’s biggest banks by return on equity correlates closely with the proportion of revenue they make from retail banking, rather than from racier investment banking."
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