More than ever before, major banks and financial services companies are continuing their digital transformation efforts. They are now tackling manual processes and remain agile to manage multiple business scenarios.
A large number of them have published their results for the fourth quarter of 2022, and one of the main themes is continuing their financial and digital transformation efforts. Like other sectors, financial services firms are looking to remain agile enough to deal with whatever 2023 has in store for them.
Here is an overview of some of the major themes that emerged during the bank earnings conference calls led by our technological partner Celonis. In particular, it covers process economics and the impact of process exploration and execution management across sectors.
An uncertain economic future
The economic future is uncertain. It's no surprise that banks are facing higher interest rates and credit risks that could be undermined by rising borrowing costs. However, banking executives noted that the consumer remains strong.
“We are cautious about the level of economic activity and are seeing some slowdown in inflation, GDP and what that means in terms of demand from our customers. It's not much more than that.”
CFO of M&T Bank Corp
Darren King, CFO, added: “we don't see any concerns about credit. We're just seeing some caution as people wait to see how the economy evolves in 2023. And so, we're careful about that as well. “
Fifth Third Bancorp CEO Timothy Spence, said that economic prospects depend on the industry. For example, manufacturing customers are “more optimistic” about inflation and supply chain issues, but they need to consider whether they can pass inflation on to customers before costs drop.
David Solomon, CEO of Goldman Sachs, said during the conference call conducted by Celonis teams on the company's fourth-quarter results that CEOs are cautious in the short term.
“They are rethinking business opportunities and would like to see more stability before engaging in longer-term plans.”
“Many businesses have started preparing for more challenging times by focusing on factors they can control.”
David Solomon, CEO of Goldman Sachs
“Our base case scenario is for a slight recession,” he also said. Brian Moynihan, CEO of Bank of America.
Work on efficiency, productivity, and process excellence continues. Citigroup CEO Jane Fraser, said during the company earnings conference call that the financial services giant is focused on automation, data, and process excellence.
“We are streamlining our processes and making them more automated while improving the quality and accessibility of our data. It will make us a better bank.”
Citigroup CEO, Jane Fraser
Citigroup CFO Mark Mason added that digital transformation efforts focus on risk, control, data, and financial programs. “A lot of what we do is manual,” Mason said. “This technological development will allow us to reduce a large part of this manual activity and lower the company's operating costs.”
Wells Fargo CFO Mike Santomassimo, noted that the efficiency initiatives have worked well, but that there is still a lot of work to be done.
“It is important to note that while we have made substantial progress in executing our efficiency initiatives, we still have a significant opportunity to be more effective across the business,” he said. “It's still a multi-year process.”
Wells Fargo CFO, Mike Santomassimo
Transformation efforts therefore vary between banks. But those who have published their results so far have said they will continue to invest in technology and systems, financial and digital transformation.
Charles Scharf, CEO of Wells Fargo, in particular, said:
“We are implementing an operating model Cloud-native that allows us to innovate more quickly. We also invested in modernizing payments and business lending, removing legacy applications and digitizing end-to-end processes. These enhanced digital capabilities are just the beginning of the initiatives we have planned as part of our multi-year digital transformation.”
Charles Scharf, CEO of Wells Fargo
Mr. Scharf also admitted that transforming Wells Fargo systems includes consolidating duplicative systems.
Finally, Morgan Stanley CFO Sharon Yeshaya, assumed that the company was focused on the resilience and integration of the platforms acquired in recent years.
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Sources: StoryShaper, Celonis
