The global banking sector has made some progress over the past year towards stabilizing after the financial crisis. Banks have launched numerous initiatives to improve capital efficiency, revenues, and costs. However, the impact was not reflected in 2011 earnings, due to the combined impact of low interest rates and tightening capital requirements. Further, the sector faces some difficult choices going forward as it strives to improve performance and regain the confidence of investors and society. Amid tigter regulation, shifting customer dynamics and macrovolatility, the search for a sustainable model goes on. In this report we examine the current state of the sector, and present our view of the changes necessary to restore banks to the health and vigor they are capable of achieving.