The Post-Zero Era: How Rising Rates Are Reshaping Bank Profitability
Rising interest rates are reshaping bank profitability after years of near-zero returns. How the post-zero era is creating winners, losers, and new strategic trade-offs.
After more than a decade of near-zero interest rates, the rapid normalisation cycle of 2022-2023 has fundamentally altered the profitability equation for banks worldwide. Global Banking Monitor's 68-page report examines who is winning, who is losing, and what the strategic implications are for bank leadership teams.
The report provides detailed analysis of margin dynamics, deposit competition, lending shifts, and balance sheet strategy in an environment most bankers have never experienced.
Key findings
- Net interest margin expansion has been significant but unevenly distributed. Banks with floating-rate asset books and sticky deposit bases have benefited most, while those dependent on wholesale funding face margin compression from the other side.
- Deposit competition is intensifying faster than expected. Customer behaviour has shifted, with rate sensitivity increasing sharply and deposit migration accelerating - forcing banks into pricing decisions that erode the margin benefit.
- Lending demand is cooling as rates bite. Mortgage volumes have fallen sharply in most markets, corporate lending is becoming more selective, and risk-adjusted returns require careful recalculation.
- Balance sheet strategy has moved to the top of the CFO agenda. Asset-liability management, hedging strategy, and capital allocation decisions are more consequential than they have been in over a decade.
- The profitability boost is unlikely to persist at current levels. As deposit repricing catches up and credit losses normalise, the margin windfall will narrow - making cost discipline and strategic positioning the key differentiators.
What the report covers
- Executive Summary - Key shifts in profitability drivers, winners and losers, and strategic implications
- The End of Zero Rates - Historical context, speed of rate increases, and market expectations
- Net Interest Margin Expansion - Asset repricing dynamics, liability lag effects, and margin sustainability
- Deposit Competition - Changing customer behaviour, pricing pressure, and liquidity implications
- Lending and Credit Demand - Mortgage market shifts, corporate lending trends, and risk-adjusted returns
- Balance Sheet Strategy - Asset-liability management, capital allocation, and hedging strategies
- Risk Implications - Credit deterioration risk, liquidity stress scenarios, and market volatility
- Regional Variations - US vs Europe vs Asia, regulatory differences, and market structure impacts
- Strategic Implications for CFOs - Margin optimisation, cost discipline, and capital planning
- Outlook and Scenarios - Base case, downside risks, and upside opportunities
Who should read this
This report is essential reading for CFOs, treasurers, ALM heads, and board risk committee members. It is equally relevant for investors and analysts seeking to understand the profitability dynamics driving bank performance in the post-zero rate environment.
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