Four things APAC banks must do to stay ahead of the game

Driving a value-focused digital transformation is one.

McKinsey & Company's analysis of 328 banks in the region showed that while 39 percent posted an economic profit in the period from 2003 to 2006, only 28 percent did so from 2011 to 2014.

"Banks that simply try to wait out the storm will likely find themselves struggling for survival, but those that take action can uncover growth opportunities and measures that could help rekindle their momentum."

McKinsey's analysis and experience suggest that four imperatives must be understood and addressed for banks to gain strength amid the turbulence:

Focused growth: Banks should explore three clear pockets of growth – services for the unbanked and underbanked, an expanding affluent middle class, and the emerging importance of small and midsized enterprises to corporate banking. The choice will depend largely on a bank’s capabilities and strategy, with some universal banks pursuing them all.

Drive a value-focused digital transformation: With margins under pressure, banks must rapidly drive digitization, especially to control costs. Approaches will vary, but includebuilding new digital businesses and using digital technologies to transform existing systems and customer journeys.

Strengthening balance sheets: Banks must also find ways to strengthen their balance sheets by addressing the growing volume of non-performing assets. Banks can explore creating asset management companies as a short-term solution, while working to improverisk management provides a longer term fix.

Enabling the organization: Banking organizations must adapt to the new environment. In particular, they should build partnership skills and form alliances with FinTechs and others to create and enable a digital ecosystem. The organization also needs to become more flexible and nimble to bring out new products and services much faster than in the past. And finally, banks must revise their approach to talent and culture, creating room for innovation.