With inflation at a 40-year high, and multiple shocks disrupting the financial and business landscape, some of the largest banks in the United States are employing a multiple-front strategy to help manage the impact of rising costs in the current volatile operating environment.
As they work to mitigate the impact of inflation on their own businesses, banks should also view this challenging environment as an opportunity to provide more high-value financial advisory and financial infrastructure services to customers.
From bottom line to top line, inflation is top of mind across all industries. The 2022 KPMG Inflation Survey, conducted in May 2022, captures a long-term view of how inflation is impacting strategic decisions and corporate behaviour.
It reflects the responses of 300 finance executives across five industries, including 60 banking executives, primarily from institutions with balance sheets larger than US$10 billion in assets.
Key survey findings
Increase in technology spending
Digitisation of operations is an increasing cost priority
Nearly all banks surveyed are increasing technology spending this year, anywhere from 5% to almost 20%. In 2021, only about six in 10 banks increased their technology spending within that range.
Wage and workforce concerns
Wage inflation and workforce matters move up the agenda
The majority of bankers surveyed expect wages to rise from 5% to 15% over the next 12 months. As a result, many institutions are weighing the need to attract and retain talent against spending concerns.
Relooking commercial real estate
Space-leasing issues require more of management’s time
90% of banking respondents said they would allow full-time remote work. Firms are also looking to renegotiate leases and for less expensive spaces. Together, these could reshape the commercial real estate economy in many cities.
Political instability and credit risk
Global political instability could spark increasing credit risk
Geopolitical risks can significantly impact exchange rate fluctuations and operational planning. The current volatile environment requires banks to explore possible downside risks and plan prudent responses.
Commercial clients of banks are set to face severe financial management challenges related to inflation. As they work to manage its impact on their own businesses, banks should also view this challenging environment as an opporunity to provide more high-value financial advisory and financial infrastructure services to customers.
Download our full report for more survey insights.
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