About a third of the banking and finance industry's top executives have accurately predicted the sector's timetable for recovery in comparison with the broader economy. But which third got it right is anyone's guess.
In a KPMG LLP survey of 130 senior-level industry executives, to be released today, 35% said they expect the sector to rebound sooner than the U.S. economy as a whole. Another 35% said the industry is on the same timetable as the broader economy, while 30% said they expect the industry's recovery to lag that of the overall economy.
Leaders at nonbank finance companies were more optimistic than their counterparts at traditional banks, with 42% of nonbank executives predicting a recovery ahead of the broader economy's, compared with 29% of banking executives. But bankers have the rosier outlook on profits, with 77% expecting earnings power to improve a year from now. Only 58% of nonbank executives made a similar prediction.
Managing risk was cited most frequently as the biggest challenge facing the executives' businesses. Finding new sources of revenue growth, complying with regulations, raising capital and restoring investor confidence were other key obstacles.
"Although the results of this survey suggest senior leaders think the industry has hit the bottom of the downturn, clearly, they still indicate that finding new sources of revenue and improving their management of risk will be major challenges in the year ahead," said Scott Marcello, deputy leader of KPMG's financial services practice.
Eighty-eight percent of respondents said their companies were counting on new or modified risk management plans as they adjust to the downturn, 56% had already implemented changes and 32% were considering making changes. Other commonly cited strategies included using technology solutions to reduce operating costs, lowering head count and cutting capital spending.
In keeping with their reputation as cheerleaders-in-chief, CEOs generally had a more positive assessment of the state of the industry and were more optimistic than other types of executives about its prospects. Among the CEOs polled, 36% said in the sector's profitability was better than it was a year ago, a view shared by only 22% of all respondents in the poll. And 76% of CEOs said they expected profitability to be better still a year from now, versus 68% of respondents overall.
CEOs also held the highest opinion of their companies' ability to cope with the economic downturn and capitalize on a recovery. Around 44% characterized their businesses as having been well positioned for the downturn, and 56% said they were well positioned for a recovery, compared with overall response rates of 33% and 48%, respectively.
Only 6% of all respondents said their businesses were not positioned well for a recovery, versus 8% of the CEOs. But non-CEOs were far more likely to say that they saw their businesses as being situated somewhere in the middle.