Bank Optimisation


Morgan Stanley/Oliver Wyman has an interesting read on Mis-allocated Resources: Why Banks Need to Optimise Now.  Decreased margins require banks to understand their advantage, and leverage it to clients.  Optimisation is strongest in Fixed Income – no surprise.

About equities:

Distribution and research are two of the biggest challenges.Investors we met highlighted that quality content and senior coverage were amongst the top differentiators between banks or boutiques that they used.

Other interesting commentary:

The vast majority of IT, processing and support behind banking services is delivered in-house with platforms that are highly duplicative across players and offer very little by way of competitive advantage. At the same time the banks have suffered rising costs of infrastructure even while their profits have been dropping.

Technology investment has a critical role to play in delivering on the optimisation agenda, for example in supporting market structure change, and in tackling longstanding sources of inefficiency in bank processing. A shift in gear is required, away from reactive regulatory remediation towards a more strategic infrastructure change program, and we are already seeing the leading banks start to make this transition

Technology investment has a critical role to play in delivering on the optimisation agenda, for example in supporting market structure change, and in tackling longstanding sources of inefficiency in bank processing. A shift in gear is required, away from reactive regulatory remediation towards a more strategic infrastructure change program, and we are already seeing the leading banks start to make this transition

Research is a differentiator

Distribution:

“The sell-side has built up multiple overlapping sales functions as new channels have emerged (generalists, research sales, specialists, sales traders, electronic sales, regional sales, delta one sales). These could be justified when
investors turned over portfolios at least once per year and paid blended rates of 10bps / 4c per share, but those conditions are not coming back”

Technology areas of interest (quoted again from the article):

  • Fixed Income market connectivity
  • Corporate treasurers integration (payments, liquidity management, hedging)
  • Electronification of Equity derivatives
  • Using customer data across the bank to drive insight- pattern analysis
  • Improved understanding of economics of client business
  • Client self-service and dynamic reporting
  • Asset optimisation solutions, across risk, collateral, settlement and legal entity optimisation
  • Reference data control and quality assurance
  • Retooling research and analytics – speaks to the above point

 

The value of wealth management clients to a Wholesale bank is very high, given the synergies in transaction execution, asset management and content

~ by mdavey on July 8, 2014.

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