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Banking CEOs Show Cheery Outlook – KPMG

Amanda Cheesley

8 January 2024

Despite global economic and geo-political uncertainty, banking CEOs from across the globe are confident about the growth of their industry and businesses over the next three years, according to the 2023 Banking CEO Outlook.

They maintain a positive outlook, with an underlying confidence in the growth momentum for their organisation and an emphasis on digitalisation and talent retention.

“The main sentiment among bank CEOs is cautious optimism. They feel quite able to navigate current uncertainty, thanks to the steps taken in recent years to strengthen governance and risk management. With solid management capability, capital and liquidity in place, everyone is looking towards growth possibilities," Francisco Uría, global head of banking and capital markets at KPMG International, said.

Nevertheless, their convictions have weakened year-over-year, the report shows. While confidence in growth prospects for the global economy over the next three years saw a marginal decline, from 72 per cent to 70 per cent, confidence in their industry’s growth prospects declined significantly, from 84 per cent to 76 per cent. Similarly, CEO confidence in their company’s growth over the next three years, fell from 82 per cent to 76 per cent. This weak confidence can be linked to the growing acceptance that political uncertainty, and predictions of short-lived, technical recessions in various markets, may prevail longer than forecast a year ago.

When asked to indicate the single largest risk to their organisation’s prosperity over the next three years, a resounding 79 per cent stated the cost of living, the report shows. Not far behind in the rankings of largest risks, CEOs listed disruptive technology (76 per cent), regulatory demands (74 per cent), talent (74 per cent) and cybercrime (71 per cent).

Despite the difficult economic conditions, banking CEOs also know that an ESG strategy has become a requirement. Sixty-three per cent of CEOs think that ESG is now fully embedded into their business as a means of value creation. They also believe that their ESG strategy will have the greatest impact on building customer relationships (29 per cent), shaping capital allocations, partnerships and M&A strategy (20 per cent) and driving financial performance (17 per cent).

“With most stakeholders now expecting companies to have an ESG strategy embedded into their business models, bank CEOs appreciate the importance of investing to achieve their stated ESG and net-zero commitments, particularly in the areas of climate change and diversity and inclusion. Many are going beyond compliance demands for a longer-term return," Paul McSheaffrey, senior banking partner, Hong Kong, KPMG China, said.

When asked about their top operational priorities for the next three years, an increasing number of CEOs highlighted their employee value proposition as a means of attracting and retaining the required talent, the report shows. While CEOs have maintained a steady year-over-year commitment to improving the customer experience and achieving organic growth, they showed a marked, declining focus on advancing the digitalisation and connectivity of their company’s functional areas.

With a strong appetite for M&A, if the right conditions arise, most are prioritising expanding their workforce skills and capabilities.

Survey participants were also enthusiastic about the benefits of generative artificial intelligence (AI) and are prioritising investment in these technologies. While they are attuned to the challenges that arise in tandem with technology adoption, including the increased risk and frequency of harmful cyber attacks, they expect a clear return on these investments and recognise the need to fortify their institutional safeguards, the firm said.