The marching orders are clear: Relieve profit pressure, speed products to market, tackle regulations, and reduce risk.
Banking profits have been declining for a decade and aren’t likely to recover soon. Return on equity for the US banking sector fell sharply during the early months of the pandemic, then climbed to nearly 15% in the first quarter of 2021 before declining again to about 13% in the first quarter of 2023, according to data compiled by Statista. The ROE for European banks has dropped even lower, plunging into negative territory in the second quarter of 2022 before climbing to a still-anemic 9% in the first quarter of 2023, according to the European Central Bank. Higher capital requirements, lower fees and commissions, and higher loan loss provisions are partly to blame for the recent softness.
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