Are cost reduction and efficiency improvement still top priorities?
Indeed, they are. Investment banks have faced a challenging landscape over the last eight years, characterized by declining revenues, high costs and regulatory pressure. While the industry’s average cost-to-income ratio grew by three percent in 2016, many banks are still struggling to return to profitability, and simplification remains top of mind. There is still work to do in reducing errors and duplication, transitioning away from legacy technology and improving client service.
It’s time for banks to move beyond tactical cost reduction toward strategic initiatives inside and outside their organizations. Good governance, strong leadership and a long-term view will be essential for achieving the outcomes the industry requires and ultimately creating an environment for sustainable growth.
What’s new on the digitization and innovation front?
We’re seeing investment banks increase their investment, participation and collaboration in digital technologies. They’re looking for new ways to engage third parties and try to make these innovations work for them across the organization.
It’s not just about getting rid of legacy infrastructure. It’s about becoming more efficient across the organization, attracting top talent, and improving the employee and client experiences.
What are the biggest signs that industry interest in utilities and ecosystems is growing?
Three things stand out to me. First, more investment banks are embracing the cloud. Recently, JPMorgan CIO Dana Deasy confirmed the importance of cloud providers in enabling digital technologies and delivering on the strategic priorities of banks.
Second, collaborative-based technologies are gaining traction. The R3CV banking consortium, which began in 2013, now has more than 40 banks and financial institutions on board, including big names like Bank of America, Citigroup, Goldman Sachs and Morgan Stanley. At last count, Hyperledger has 95 members and more than 100 contributors across finance, banking, manufacturing, technology and other key industries.
Third, the push to digital platforms is underway. Bank of America Merrill Lynch’s Instinct® Loans, a new electronic platform for the secondary trading of syndicated corporate loans, is just one example.
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