Top banks 'must adapt to market conditions'

Nicholas Hesketh our consultant managing the role

The conventional wisdom is that top banks, the largest players in the market, have managed to deal with the ongoing financial crisis relatively well, while their smaller counterparts struggle to keep their heads above water.

However, a new report from McKinsey & Co has indicated almost 100 of the world's biggest banking groups could be at risk of collapse over the coming years as they are overtaken by rivals and fail to change their operating model to reflect the current conditions.

Some one-fifth of the world's top 100 banks could be takeover targets for their rivals due to their underperformance in the market, reports the Telegraph.

McKinsey is a respected advisor on the banking sector, working with many of the world's largest financial institutions to help them deal with the ongoing changes across the industry.

These concerns were raised in its annual report on the financial services trade, in which it also suggested only ten organisations will be able to adapt in such a way they emerge from the also-rans to become leading banks.

It also called for more firms to utilise a back-to-basics strategy whereby they avoid complicating their approach too much.

"Banks that get caught in these traps are more likely to be among the 20 per cent of institutions worldwide that, in our estimate, may become acquisition targets in the next several years," McKinsey claimed.

Royal Bank of Scotland hired the firm two years ago to help come up with a strategy that focused less on its investment banking arm, indicating a major part of the organisation's approach - it feels that, with global growth dropping, banks should become more focused and less wide-ranging.

McKinsey also called on banks to embrace technology, something which could prove a major divider between those firms that succeed and those that fail in the coming decade.

Investment in cyber-security, automated systems and more could save banking groups billions over the next few years, assuming they are set up effectively.

11/04/16
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Becky Hughes

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Becky Hughes

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Financial services sector 'looking positive'
Financial services sector 'looking positive'

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The UK's financial services sector has endured a difficult few years but appears to be coming up swinging, with a new report from the Confederation of British Industry (CBI) and PricewaterhouseCoopers (PwC) highlighting the sector's growing confidence and positivity. Optimism surged in the three months to September, as firms admitted to seeing more pluses in their business situation than they have done for almost 17 years. A major factor in this improvement is employment - the number of people working in the financial services sector jumped by 24 per cent, the fastest rise since September 2007. Furthermore, the CBI anticipates 10,000 more jobs being created in the third quarter of 2013, with an additional 2,000 coming in the final quarter of the year. This will bring the number of financial services jobs to 1.14 million as the sector continues to expand and recover. "With optimism rising and jobs and profitability growing, this is an encouraging quarter for the financial services sector, despite a fall in business volumes in banking," said CBI director of economics Stephen Gifford. However, anyone experiencing a fuzzy feeling of warmth and excitement about the industry's growth prospects needs to bear in mind the many problems continuing to hold it back from expansion. Dealing with high levels of regulation "is increasingly weighing on plans for business expansion", concluded Mr Gifford. Concerns have long been mooted that the government's desire to avoid any further financial crises could prevent the sector form enjoying strong levels of growth, with business leaders warning against an excess of red tape. Amendments to the Banking Reform Bill have been introduced in a bid to ensure senior executives avoid serious misconduct. The possibility of a referendum on EU membership has also caused ripples in the world of financial services, which has strong links with many European firms and banking groups. Nevertheless, the minor economic recovery seen across the UK as a whole has been reflected in the banking industry's new-found buoyancy.

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The UK's financial services sector has endured a difficult few years but appears to be coming up swinging, with a new report from the Confederation of British Industry (CBI) and PricewaterhouseCoopers (PwC) highlighting the sector's growing confidence and positivity.

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UK's investment banks 'must be competitive'
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Britain's investment finance sector could be placed at risk if the country continues to indulge in "bank bashing", it is claimed. This is the suggestion made by director of Royal London Asset Management Robert Talbut, who warned that hounding the industry is placing the City "in danger". Speaking to the Sunday Telegraph, the financial services expert noted firms such as the investment banking arm of Barclays could be chased out of London by public anger about bankers' bonuses. Barclays was recently slated for paying large sums to staff despite seeing a dip in profits and experts have suggested negative attitudes could push it to New York until the dust settles. "If ultimately they [Barclays] take the view that the regulatory and political pressure is going to continue unremittingly that could be the right thing for them to do," stated Mr Talbut, who is also chairman of the Association of British Insurers' investment committee. The article also quotes chairman of The City UK and Standard Life Gerry Grimstone as flagging up the importance of London retaining its status as a major global finance centre. He claimed: "It is very important there are strong investment banks in Britain. It is very, very important that London is one of the investment banking centres of the world." Conservative MP Mark Garnier, who sits on the Treasury select committee in the House of Commons, said he would "feel very sorry" if banks pulled out of the UK in response to the backlash that has taken place in recent years. A recent report on banks optimising their assets by Oliver Wyman and Morgan Stanley suggested "fixing mis-allocated resources presents an immediate opportunity for the industry" and banks could improve returns significantly by taking tough decisions this year. It explained that European lenders had experienced a fall in revenues in previously strong areas of banking and advised organisations to refocus efforts towards their strengths. The study recommends re-allocation and improving capacity in order to trade in areas where banks have a real advantage over competitors. It predicts companies will focus more domestically or regionally and there will leakage of value to a growing array of non-bank specialists.  

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Britain's investment finance sector could be placed at risk if the country continues to indulge in "bank bashing", it is claimed.

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