• A number of bank CEOs intend to develop further partnerships with FinTechs and enhance digital offerings.
  • Majority of banks (64%) to reduce geographical footprint as hybrid working expected to stay.
  • Regulatory burden and talent retention two of the banks’ biggest challenges with costs expected to increase to deal with both.
  • Stakeholder expectations increasing to tackle ESG agenda - but banks are only partially ready to respond so far.
  • Irish and international banks to continue to grow their customer and product base, with M&A a potential feature for 2022 for domestic banks in particular.

2022 looks to be a challenging year for Irish banks and international banks in Ireland, according to a KPMG Ireland banking CEO survey, with the rise of FinTech, the impact of regulation, the ESG agenda, talent retention, inflation and interest rates amongst the main concerns for bank CEOs in Ireland. However, this is balanced with strong growth aspirations, a focussed digital agenda and both organic and inorganic expansion expected to feature also.

The role of FinTechs

A significant number of bank CEOs (64%) stated their intention to further develop partnerships or alliances with FinTechs as a priority, with 46% seeing it as a medium priority, and 18% as a high priority - recognising the opportunity that such arrangements may present in expanding their customer propositions.

CEOs also acknowledged the lower regulatory burden faced by FinTechs, which allows them to be more agile. 64% of CEOs ranked lower regulatory burden as either first or second in a list of potential threats from FinTechs. Agility and ability to outpace the banks was identified as the second biggest threats posed by FinTechs, with digital capacity, costs/pricing and versality coming in at 3rd, 4th and 5th respectively.

One-third (36%) also stated that enhancing their digital offering is a high priority, with 10% saying that this has already been done and a further 27% saying it is a medium priority. Only 18% consider re-evaluating their pricing structure as a high priority, with 54% and 10% considering it a medium and low priority respectively. 

Appetite for M&A activity

In the further commentary provided, international banks that have set up in Ireland to access the EU market post-Brexit, will continue to migrate their products and customers to European customers in Dublin in 2022, with several international banking CEOs confirming M&A as a possible route for further expansion in the KPMG survey.

Economic and financial challenges

Negative interest rates pose risks to banks, according to survey respondents. Negative interest rates are continuing to affect banks heavily with 27% stating a ‘very high’ impact and 46% a ‘high’ impact.

Almost two-thirds (64%) of banking CEOs expect inflation to be stronger in 2022 than 2021, with 27% believing it will remain the same and only 9% stating that it will reduce from 2021 levels. A slight majority of 54% believe inflation will negatively impact their strategy either moderately (36%) or significantly (18%).

Banking CEOs also stated that their costs in relation to regulatory burden and retaining talent are high, with two-thirds of CEOs expecting higher regulatory costs in 2022 and over one-third (36%) stating they expect employee costs to rise. 

Growth opportunities

While there are still several financial challenges ahead, bank CEOs are continuing to look for both organic and inorganic growth opportunities in the market, according to their survey responses. The opportunities outlined range from focusing on growing their customer base to broader portfolio acquisitions. It is expected that these growth opportunities will continue to evolve for the foreseeable future. 

The impact of COVID-19

Banks have largely fared well throughout the pandemic, with a majority of banking CEOs (55%) stating that the pandemic has either not affected them at all (10%) or only on a limited basis (45%), with only 27% stating it had affected them ‘quite significantly’ and 18% stating ‘moderately’.

Prioritising Environmental, Social & Governance (ESG) in 2022

Almost two-thirds of bank CEOs see stakeholder demands relating to ESG reporting significantly increasing in 2022 (64% stated either a high or moderate impact). Most banks however are still on their ESG readiness journey, with 64% describing being ‘somewhat’ ready to manage external ESG requirements.

Hybrid working – the new normal?

None of the banks surveyed by KPMG Ireland expect their staff to return to working a five-day week in the office. The preferred model of working outlined by CEOs is a hybrid model, with expectations that C-Suite executives and department heads would spend the most time in the office, at least two to three days, while other less senior staff are expected to spend more time working from home.

Perhaps as a direct consequence of this, most bank CEOs (64%) stated their intent to reduce their geographical footprint in 2022.

“CEO priorities vary by bank given different stages of the operating lifecycle. It is absolutely clear however that regulatory compliance and ESG stand clear as the top two items receiving most attention as we look out into 2022 – with a clear imperative to maximise talent retention in order to deliver against these objectives”, stated Ian Nelson, Head of Banking and Capital Markets at KPMG Ireland.

More in Banking

Media queries

If you’re a media professional and have any questions about this article or would like to speak to one of our experts for background or interview purposes, please don't hesitate to reach out to us. Contact Evan O'Quigley of our Communications team for more information.