Current conditions
The business of Investment Banking has experienced significant market fluctuation and change over the past few years. Evidence suggest that, at worst, Investment Banking revenues fell a full 45% through 2008 – at a cost to the industry that is comparable to six financial quarters’ worth of revenue. On the surface, the subprime meltdown has resulted in a liquidity crisis and credit crunch that has triggered a swathe of job losses, capital losses and balance sheet rebuilding. But it is beneath the surface that the real damage lies – with a far-reaching and potentially long term loss of faith in the western world’s Banking Industry. In contrast, emerging (BRIC) markets in Brazil, Russia, India and China are growing from strength to strength.
The future of Investment Banking
Investment Banks must move forward in a climate where executive management teams face intense scrutiny on governance and structure. With prudence as a watchword and with massive pressure to secure robust capital reserves, Banks must be seen to be making provisions for further rainy days ahead. Many of the big banks are responding by divesting low profit and high risk operations and trends towards consolidation and acquisition appear to be looming on the horizon. In short, Investment Banking appears to be an industry in search of a brand new business model if it is to effectively re-invent itself and rebuild lost faith.
In this competitive environment, analysts suggest that the winners will be those banks who can become one stop shops for their clients, achieving this powerhouse status via a combination of large capital reserves, an ability to listen closely to the market and by being sufficiently nimble to respond rapidly as conditions continue to change. Banks must differentiate on the outside and re-engineer internally for efficiency and simplicity. It is these banks that will own the future – one that sees sustainable global growth, at reduced margins, but without the danger that goes hand in hand with the false profits of recent years.
The value of outsourcing when trading is tough
High quality, globally-provided outsourced solutions offer a positive step in the right direction for Banks exploring these new operating models. Banks, who embrace the outsourcing model for the provision of non-core activities, liberate their time and resources to address a delicate balance that is pivotal to future success: reinvigorating growth via customer-inspiring products and services, whilst actively and progressively managing both cost and risk.
How Williams Lea can help
We can help banking clients address the specific pressures they face in the following areas:
- Cost control and reduction
- Improved compliance and reduced risk
- Enhanced customer relationships and differentiation
- Global working practises