India to become the third largest domestic banking sector by 2050 after China and the US, says a recent PwC survey

  1. The emerging economies’ banking sectors are expected to outgrow those in the developed economies by an even greater margin than we projected before the financial crisis.
  2. By 2050 ‘E7’ could have domestic banking assets and profits that exceeding the G7 by around 50%.
  3. China could overtake the US in terms of the size of their domestic banking sectors by around 2023.

The combined domestic banking assets of the ‘E7’ emerging economies of China, India, Brazil, Russia, Mexico, Indonesia and Turkey will exceed those in the ‘G7’ countries sooner than predicted before the financial crisis, according to PwC’s ‘Banking in 2050’ report published today.  The G7 comprises the US, Japan, Germany, the UK, France, Italy and Canada.

India’s rate of growth by contrast is expected to overtake that of China’s in the long run as it has more catch-up potential and its working age population growth will be much stronger in the long-term. India’s share of global GDP in $ terms could therefore increase from only 2% in 2009 to around 13% in 2050 after allowing also for potential real exchange rate increases. This makes it one of the most rapidly growing economies over this time period. However, to sustain these high growth rates India must continue to pursue growth-friendly policies (e.g. invest in infrastructure, open up its markets to increased competition, reduce budget deficits, increase rural education levels particularly for women and reduce bureaucracy).

On the future expectations of the Banking industry, Harsh Bisht , leader – Banking and Capital markets, PwC India said:

“China and India could have a combined share of around 35% of global banking assets by 2050. The US, Japan and Western Europe are all projected to see large falls in their share of global banking assets in the coming decades.”
 

Commenting on the shift of global banking power to the emerging economies, John Hawksworth, chief economist, PwC, said:

“A fundamental shift in the geography of the world economies will take place during the working lifetime of those at the start of their career with huge implications for job creation, language learning and financial systems. The GDP of the E7 countries is currently well behind that of their G7 counterparts but we’ll see them at level pegging within the next two decades and well ahead within the next four.  In the banking world, this shift is happening even faster than anticipated and appears to have been accelerated by the financial crisis as emerging market banks have been relatively shielded from the effects of declining asset values.  We could now be talking about global banking assets quadrupling to around $300 trillion by 2050 with banks around the world fighting for a share. ”

The report indicated that a range of M&A options are available to both emerging and developed market banks and we can expect to see a mix of consolidation, foreign banks entering emerging markets and banks from the E7 expanding overseas.  The E7 doesn’t need the G7 for capital, decision making or consumers so the established economies will have to make a strong case to convince new economy policy makers of the benefits of inviting foreign competition in.

ENDS

 

Notes for editors

  1. *A table ranking domestic banking assets by country in 2009 and projections for 2030 and 2050 can be found on page 19 of the report.
  2. Dates at which E7 economies overtake G7 in terms of the size of their domestic banking assets

Country pairs

Overtaking year (2011 analysis)

Overtaking year (2007 analysis)

E7 overtakes G7

2036

2046

China overtakes US

2023

2043

India overtakes Japan

2033

2041

Brazil overtakes Italy

2045

Beyond 2050

Russia overtakes Italy

2039

2047

Mexico overtakes in Italy

2048

2038

Turkey overtakes Canada

2045

Beyond 2050

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