IMF Identifies Nine Big Banks Likely to Struggle With Profitability

Projects Deutsche Bank, Citi, Barclays and others could deliver subpar profits by 2019

The International Monetary Fund said some of the world’s largest financial institutions—including Deutsche Bank , DB -0.38% Citigroup , C +0.05% Barclays BCS -0.36% and a few Japanese institutions—could struggle in coming years to remain sufficiently profitable.

“About a third of banks by assets may struggle to achieve sustainable profitability, underscoring ongoing challenges and medium-term vulnerabilities,” the IMF said, referring to the world’s most important financial institutions.

 The report named nine financial institutions in all—

  1. Barclays BCS 
  2. Citigroup, 
  3. Société Générale , SCGLY -0.43% 
  4. UniCreditUNCFF -0.54% Group,
  5. Deutsche Bank, Barclays, 
  6. Standard Chartered , STAN -0.30%
  7. Sumitomo Mitsui Financial Group , SMFG +0.25% 
  8. Mizuho Financial Group MFG +0.00%and 
  9. Mitsubishi UFJ Financial Group MTU +0.45% —

as likely to deliver subpar profits.

 

.. “Institutions that are not profitable might not be able to generate enough capital in the future should adverse shocks hit,” Tobias Adrian, the director of the IMF’s monetary and capital markets department, told reporters. “It might become a financial stability risk not to be profitable.”

.. The IMF said the consensus among private-sector bank-industry analysts was for a return on equity of less than 8% for each of those nine banks in the year 2019.

.. Deutsche Bank’s stock, for example, trades at less than half of its book value, or net worth, and has traded well below this level since 2010.