Profit margins are under siege due to intense industry competition. Tighter monetary policies, deteriorating loan quality and macroeconomic considerations, such as interest rates and currency fluctuation, will effect the industry this year. In the short term, declining interest rates will cause interest rate spreads to narrow for most international banks. Credit costs should not be a burden for most international banks. Japanese banks and emerging markets are the exception.
All banks seem to be undergoing a level of cost control and restructuring.
These positive measures should help slow the decline in profit margins. A survey of five international banks by Institutional Investor shows that the size of a bank's assets does not directly correspond to profitability. The key factor to success for international banks is the ability to focus and penetrate the international market while remaining competitive. These ratios are average. The investment outlook for international banks is mixed.