Canadian banks not immune to global challenges, Ernst & Young
VANCOUVER---Canadian banks are expected to continue doing well relative to their global peers but aren't necessarily shielded from the challenges plaguing the world's financial institutions, including concerns about growth, capital, data and regulatory issues, says Ernst & Young.
"As third-quarter reporting season gets under way, we're likely to see that Canadian banks are holding up comparatively well despite the volatility at home and tumult abroad," explains Paul Battista, Ernst & Young's Canadian Financial Services Advisory Leader. "But the burning question for Canadian banks right now is: how do we grow from here?"
Growth is a perennial concern, Battista says. Getting the growth piece right sometimes means thinking smaller - not bigger - and adapting products and services to meet the needs of existing customers.
Ernst & Young's recent Competing for growth survey showed 63 percent of 400 executives surveyed said that incremental product/service innovation has been more successful than transformational innovation. Canadian banks have considerable room to grow when it comes to existing customers — Ernst & Young's consumer retail banking survey showed earlier this year almost 64 percent of Canadians say they plan to switch banks or have already done so because of service quality issues.
"Emerging markets represent another opportunity for growth, especially Asia-Pacific and Latin America," Battista says. "But relying on emerging markets alone is not enough. Banks' strategies for growth need to account for how services and products will evolve abroadand at home."
Battista says banks must know who their customers are, how to communicate with them and how to cross-sell to them. Some customers want high-tech services — "mobile money" — while others want relationship banking that may be low tech. "That's how banks will be able to determine which businesses and geographies they should focus on right now."
He also noted the need for banks here to maintain their laser focus on three additional areas by continuing to ask themselves core questions on capital, data and regulations throughout the year. Those questions include:
How have our internal capital needs changed?
Where should we invest, and how can we get the best possible return on our investments?
Do we have the data management tools in place to effectively manage the information we need to run our business and meet evolving regulatory requirements?
How are we going to handle the wave of new regulations coming our way in the months and years ahead?