CBI PwC Financial Services Survey

Q1 2020

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  • Confidence has fallen as the scale of the coronavirus (COVID-19) emergency becomes clear.
  • Despite the rapid switch to remote working, operational resilience has held up well.

“The FS industry, like all other sectors, has been profoundly impacted by this crisis. The industry has met its own challenges with its people and operations. But it also is a sector that provides key services to the economy. Those services, whether banking, insurance or asset management will be critical in enabling the economy to navigate through the crisis. It is critical now that the FS sector focuses on the current and future needs of its customers to allow the economy to emerge from the crisis in the best shape possible.

In dealing with the impact of COVID-19 on its own businesses the FS sector’s ability to achieve a swift and largely effective operational switch has been impressive. But it’s also clear that few institutions had built a pandemic and economic downturn of this global scale into their business continuity planning. So organisations are having to respond decisively and swiftly as they assess what’s working, what needs improvement and how to safely adapt. The quicker businesses can get operations back to some sense of normality, the better they will be able to respond to the needs of their customers, while gradually extending service and support across the market.”

Andrew Kail, Head of Financial Services, PwC United Kingdom

Confidence dips

The shift in sentiment is reflected in projected falls in business volumes and returns. Banks and building societies also expect to see a continued rise in non-performing loans.

Maintaining vital support

Important to ensure there are sufficient resources to support key workers, vulnerable customers and distressed businesses. As the ‘new normal’ remote operations are stabilised and strengthened, organisations can progressively move back to something as close as possible to business as usual.

Strengthening operational resilience

Effective digital connectivity and security are essential in enabling staff to work as effectively as possible from home. They also need clear communication and support from supervisors as they deal with the potential stresses of a new and unfamiliar working environment.

FS organisations expect to see a slight increase in operating costs over the next quarter. Systems investment will continue to increase over the next 12 months.


Priorities ahead

  • Few institutions had built a pandemic and economic downturn on this global scale into their business continuity planning. It’s therefore important to assess what’s working, what needs improvement and how. 
  • The quicker businesses can get operations back up and running, the better they will be able to respond to the customers most in need, while gradually extending service and support across the market.

Download the full survey results

Banking

What the results say

  • Banks are facing disruption to their operations, while striving to step up support for key workers, vulnerable customers and the wider economy. 
  • As lockdown continues, key priorities include how to strengthen digital capabilities and redirect resources to customers most in need.
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Confidence dips

Banks’ and building societies’ confidence about their outlook for the next three months fell in Q1 2020,. As the bulk of the responses came before the full lockdown was imposed, sentiment may have dipped further since.

Banks anticipate only marginal falls in business volumes and returns over the coming quarter, but building societies are looking ahead to more marked declines. Both expect to see a continued rise in non-performing loans.

Part of the solution

As the lockdown continues and unemployment rises, banks have a critical role to play in helping our society steer through these difficult times.

This vital support includes special assistance for key workers, vulnerable people and clients facing financial difficulties, while responding to a surge in demand from distressed customers facing loan and mortgage arrears.

Many banks and building societies are also seeking to ease the strains on the wider population through steps such as increases in credit limits, repayment holidays and waiving fees on overdrafts and late credit card payments.

Strengthening operational resilience 

The immediate challenges include reassigning staff to meet swings in demand. The most operationally agile and digitally advanced institutions are clearly at an advantage. Staff can work remotely in the most efficient and productive way. Digital self-service processes can also take care of many routine client demands, allowing staff to spend more time caring for vulnerable and financially distressed customers.


Priorities ahead

  • Delivering emergency funding and meeting the demands of customers facing financial difficulties are likely to require a step up in digital capabilities and the agility to closely target available resources.
  • By doing the right thing, the industry can demonstrate its true value to society and help cement customer loyalty and trust. 

Download the full survey results


Insurance

What the results say

  • The switch to remote working has brought significant operational disruption. But it’s clear from what we’re seeing in the market that insurers have responded well.
  • A combination of digital capabilities and organisational agility are likely to prove critical in strengthening customer engagement and support.
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Confidence dips

Insurers are anticipating a difficult quarter ahead. General insurers expect to see a steep fall in returns over the next three months. They also expect a significant rise in the value of claims over the coming year. The downbeat mood among life insurers is even more marked, reflecting the market uncertainty.

Delivering on the customer promise

Through close support for life and pensions customers facing market uncertainty and dealing efficiently with coronavirus (COVID-19)-related claims, insurers can deliver in these key moments that matter. They can also lay the foundations for much deeper and more enduring customer relationships.

Strengthening operational resilience

Operational agility and well-developed digital capabilities can help to accelerate the switch to remote working and bolster support for customers in most pressing needs.

Insurers are planning significant increases in systems investment over the coming year. This can not only help to control costs, but also strengthen customer engagement in the absence of face-to-face channels.


Priorities ahead

  • It’s clear few insurers had built a pandemic and asset value volatility on this global scale into their stress and scenario modelling. It’s therefore important to get modelling up to speed.
  •  From a product development perspective, priorities include how to build events that have generally been excluded, such as pandemics, into cost-effective business interruption cover.

Download the full survey results


Investment Management

What the results say

  • As financial performance comes under pressure, investment will be focused on systems investment over the coming year to sustain margins and deliver enhanced customer experience. 
  • Need to help businesses and society steer through the emergency is heightening the spotlight on environmental, social and governance (ESG) investing.
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Confidence dips

While the bulk of the responses came before the full lockdown was imposed, the survey suggests that investment managers already recognised the scale of the challenges ahead. The shift in sentiment is reflected in significant projected falls in business volumes and fee income over the coming three months.

Part of the solution

Investor and regulatory scrutiny of investment managers’ ability to deliver fair outcomes and value for money has been heightened by the current market uncertainty.

The emergency is also putting ESG under the spotlight. Immediate priorities include supporting the economy as businesses and jobs come under threat. In the longer term, the lessons from the emergency could increase attention on other threats including climate change. Just under half of the investment managers in the survey are actively managing climate change risks.

Strengthening capabilities

Investment managers also plan to step up systems investment over the coming year. Boosting digital capabilities could help to reduce costs and sustain margins as fee income comes under pressure.


Priorities ahead

  • With markets and businesses facing severe strains, it’s not just financial performance, but also ESG that will be a key differentiator.
  • As margins continue to come under pressure systems investment will be critical in further reducing costs and enhancing the digital customer experience.


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Andrew Kail

Andrew Kail

Leader of Industry for Financial Services, PwC United Kingdom

Tel: +44 (0) 7703 459 443

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