Big banks remain focused on transformation efforts, process excellence in 2023

Large banks and financial services firms are continuing their transformation efforts, tackling manual processes and remaining agile to manage through multiple economic scenarios.

A bevy of large banks have reported fourth quarter earnings and one big theme is that financial transformation efforts will continue. Like other industries, financial services firms are looking to remain agile enough to manage through whatever 2023 offers.

Celonis Media covers the process economy and the impact of process mining and execution management across industries. This article is based on publicly available information and doesn't reflect whether Celonis technology was used or whether the company is a customer.

Here's a look at some of the big themes that have emerged during bank earnings conference calls.

The economy is a big unknown. Not surprisingly, banks are navigating higher interest rates and credit risks related to consumers who may be squeezed by higher borrowing costs. However, banking executives noted that the consumer remains strong. "We're cautious about the level of economic activity and seeing some slowdown in inflation, in GDP and what that translates into in terms of demand from our clients. It's not much more than that," said M&T Bank Corp. CFO Darren King. "We're not seeing credit concerns. We're just seeing cautiousness while people wait to see how the economy plays out in 2023. And so, we're cautious about it as well."

Fifth Third Bancorp CEO Timothy Spence said the economic outlook depends on the industry. For instance, manufacturing clients are "feeling more optimistic" about inflation and supply chain issues but have to figure out whether they can pass on inflation to customers before costs come down.

Goldman Sachs CEO David Solomon said on the company's fourth quarter earnings conference call that CEOs are cautious in the near-term. "They are rethinking business opportunities and would like to see more stability before committing to longer term plans," said Solomon. "Many firms have started preparing for tougher times focusing on factors within their control."

"Our baseline scenario contemplates a mild recession," said Bank of America CEO Brian Moynihan.

Efficiency, productivity, and process excellence work continues. Citigroup CEO Jane Fraser said on the company's earnings conference call that the financial services giant is focused on automation, data and process excellence. "We are streamlining our processes and making them more automated whilst improving the quality and accessibility of our data. This will make us a better bank," said Fraser.

Citigroup CFO Mark Mason added that digital transformation efforts are focused on risk, control, data and finance programs. "A lot of what we're doing is manual," said Mason. "That technology build-out will allow for us to reduce a lot of that manual activity and bring down the operating cost for running the firm."

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Wells Fargo CFO Mike Santomassimo noted that efficiency initiatives have worked well, but there's a lot more work to do. "It's important to note that while we made substantial progress executing on our efficiency initiatives, we still have a significant opportunity to get more efficient across the company," he said. 'This remains a multiyear process."

Transformation efforts vary by bank. The banks that have reported earnings so far have said they will continue to invest in technology and systems, financial and digital transformation.

Charles Scharf, CEO of Wells Fargo, said:

“We're implementing a cloud-native operating model that allows us to innovate faster. We've also been investing in modernization in the areas of payments and corporate lending, taking out legacy applications and digitizing processes end to end. These enhanced digital capabilities are just the start of initiatives we have planned as part of our multiyear digital transformation.”

Scharf said that Wells Fargo's systems transformation includes consolidating duplicate systems.

Morgan Stanley CFO Sharon Yeshaya said the firm is focusing on resiliency and integration platforms acquired in recent years.

Robin Vince, CEO of The Bank of New York Mellon, said the bank has an enterprise-wide initiative to simplify and drive more efficient processes. For Vince, the bank will continually tackle systems transformation. Vince said:

Resiliency is incredibly important to our products and services. It's wrapped up in our brand and we wanted to make sure that we really took ourselves to a better place than where we were five years ago. We've largely done that. It's a continuous journey. We always have to do stuff. The next leg for us is investing in things like the applications, the digitization of our footprint. We're the world's largest custodian but we've got more than one custody system. We've got multiple loan systems. We've got five different call centers and so we're going in and seeing all of these opportunities. And then over time, we'll do the work to resolve the issues. We're working through it, and we'll continue to work through it.

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• Webinar: "Securing Market Advantage through Data Transparency and Expert Insights”

• Degussa Bank helps improve customer experience, compliance and employee workload

• Nationale-Nederlanden Bank deploys process mining for mortgage loans

Larry Dignan

Editor in Chief (former)

Larry Dignan is the former Editor in Chief of Celonis Media. Before joining Celonis, he was Editor in Chief of ZDNet and has covered the technology industry and transformation trends for more than two decades, publishing articles in WallStreetWeek.com, Inter@ctive Week, The New York Times, and Financial Planning magazine.