Financial services execs see no growth before 2010: Ernst & Young survey

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(Toronto, 13 July 2009) – The majority of global financial services companies don’t expect a return to growth until the first six months of 2010 or even later, according to new Ernst & Young research.

“The financial services industry has certainly been battered,” says Diane Sinhuber, Ernst & Young Partner and Financial Services Industry Leader. “But when the recovery phase comes, these companies are likely to emerge stronger, healthier and more focused on risk management than ever before.”

The Opportunities in adversity survey finds that while a third of the 125 global financial services respondents expected some expansion this year, 34% of those polled thought the return to growth would begin in the first six months of 2010, with 32% believing it would be further out.

“More than 60% of our survey respondents still expect to spend more time securing the future of their business. Clearly, the recession has left a lasting mark on the sector,” says Sinhuber. “But even now, opportunities exist. It’s time to build new operating models and regulatory frameworks that will carry them into the future. “

Those opportunities are part of the silver lining Sinhuber sees in the 61% of respondents who have had more chances to improve cost cutting in the last six months. Four in 10 also plan to hive off their non-core or non-performing business.

Other highlights from the survey show how the financial services sector was clearly taken aback by the ferocity and depth of the downturn:

  • Some 72% of respondents were surprised at the severity, and 70% were surprised by the speed, of the financial crisis.
  • Thirty-eight percent said their businesses had improved over the last 12 months, compared to almost 50% that had not.
  • As a result of the crisis, 70% of institutions permanently changed their risk management strategy, 68% implemented permanent differences to their regulatory framework and 54% changed their operating model.
  • Six in 10 financial institutions have seen their profitability decline and 56% have seen overall revenues decline in the same period.
  • The sticky issue of pay and reward strongly divided respondents: 45% thought it needed more regulation while just under a third disagreed.
  • Almost two-thirds were inclined to agree that co-operation between international governments helped domestic and international economies in the last 12 months.

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