Gloom yet to shift from financial services

Published on Sunday 5 July 2009 21:43

ALMOST a third of all financial services companies expect there will be no growth until at least the second half of 2010, new research has claimed.

Citing changes to risk management, a more difficult regulatory environment and a prolonged economic downturn, two-thirds of global financial services companies surveyed by Ernst & Young said they did not expect any growth this year.

Of those, 32 per cent expected growth would come in the second half of 2010 at the earliest.

The survey of executives at 125 international financial services companies revealed a high proportion were caught off guard by the recent banking crisis.

Of the companies, which were surveyed in June, 72 per cent were surprised at the severity and 70 per cent were surprised by the speed of the recent financial crisis.

Only 30 per cent of companies had seen any improvement in their business over the past 12 months, compared with almost 50 per cent that had not.

Tom McGrath, managing partner of Ernst & Young's Europe, Middle East, India and Africa financial services business, said: "The end of the recession and a return to profitability is a tough one for any industry to call.

"But financial services are naturally more cautious – and possibly more realistic – about when the return to profitability might happen." He predicted a "fundamental" reorganisation of the sector and said there "may well be some more casualties".

The survey reveals that the financial crisis has already had an impact on the way the sector operates.

Around 70 per cent of respondants said they had permanently changed their risk management strategy as a result of the crisis, while 54 per cent claimed that they have changed their operating model.

Two-thirds of the companies polled said they expected to increase the amount of time they spend on securing the future of their business.