Big banks cut lending

BY Richard Summerfield

Consumer and business lending by the UK’s largest banks has fallen by $595bn over the last five years, according to a new report from KPMG.

Total lending at Barclays, Royal Bank of Scotland, HSBC, Lloyds and Standard Chartered dropped 14 percent to £2.33 trillion in the first half of 2014, compared with five years earlier. The dramatic decline in lending is the result of the enormous fines and compensation packages which banks have had to accept in order to make amends for their recent chequered past. Since 2011, remediation payments made by the big six British banks have totalled £31bn, although the year on year remediation figure in H1 2014 was down 44 percent to £2.4bn.

The overall reduction in lending since 2009 is also a result of a new risk-averse mentality permeating the big UK banks. KPMG believes that major banking groups in the UK have lost sight of the risk-taking required in the sector. That said, it appears that a number of banks are beginning to take steps which will help the sector return to sustainable growth. Profits have begun to recover , thanks to a new tone at the top. The big six banks reported a combined profit of £15.2bn in H1 2014, continuing the return to profitability first recorded in the second half of 2013.

However, KPMG also notes that the UK’s wider banking sector is approaching “crunch time” due to the rise of pay day lenders and other shadow banking groups. Bill Michael, EMA head of financial services at KPMG, noted that “Shadow banking initiatives are increasingly penetrating under-served areas of the market. These initiatives are creating a challenging environment that traditional banks are unfamiliar with. Equally, if banks get to grip with technology quickly, there is a unique opportunity for banks to capitalise upon. While competitors entering the market do not have the same legacy-based obstacles preventing them from pursing new opportunities, banks can offer the scale, reach and experience many players cannot.”

Report: KPMG’s report analyses the published 2014 half-yearly results of Barclays, HSBC, Lloyds Banking Group, RBS and Standard Chartered

Entertainment firms eye growth in improved economy

BY Matt Atkins

The media and entertainment (M&E) industry is ready to take the spotlight, according to a new EY report, as executives shake off their fears for the economy and shift from cost cutting to growth.

EY surveyed 50 large global M&E companies for the 'It's Showtime! Digital drives the agenda, data delivers the insights' report, which showed that only 26 percent of senior executives surveyed were concerned that economic uncertainty would impact growth, compared to 62 percent in 2012. The survey spanned industry sectors including filmed entertainment; broadcast and cable networks; music and radio; advertising; internet and interactive media; and publishing and information services.

The report showed that firms are well positioned to grow their companies through capitalising on digital opportunities and investments in technology, digital talent and infrastructure, as well as acquisitions and other deals. The average deal value during the first half of 2014 was US$939m, compared with US$220m in 2013 and US$157m in 2012, with cable operators driving the rise.

"The CFOs told us in no uncertain terms that the economy is no longer an obstacle and now is the time for media and entertainment companies to invest in growth and focus on building their businesses," said John Nendick, Global Media & Entertainment Leader at EY. "The industry is now poised to deliver on the promises it has been making the past several years but has been unable to achieve because of the economy. The CFOs recognise the recession is over and it's showtime."

Though the outlook has improved, the M&E industry still faces challenges. According to EY, the greatest tests for M&E firms going forward are technology and platform disintermediation, an inability to persuade consumers to pay a fair price for content and regulatory uncertainty.

Report: It's Showtime! Digital drives the agenda, data delivers the insights

Infrastructure spending to soar, shift eastwards

BY Matt Atkins

According to new PwC research, global spending on infrastructure and capital projects is set to rocket, hitting $9 trillion by 2025, up from $4 trillion in 2012. The focus on spending will also shift from West to East, says the new report 'Capital project and infrastructure spending: Outlook to 2025'.

The majority of growth is expected to come from the emerging economies. China, which became the world's top spender on capital and infrastructure in 2009, will be a primary driver. “Emerging markets, especially China and other countries in Asia, without the burden of recovering from a financial crisis, will see much faster growth in infrastructure spending,” said Richard Abadie, global capital projects and infrastructure leader at PwC.

Developing economies currently account for nearly half of all infrastructure spending, and while mature markets will continue to grow, they will see their infrastructure spending shrink from nearly half of the global total today to about one-third by 2025.

Underlying this shift is accelerating urbanisation in many developing countries, which will result in spending growth in sectors such as water, power and transportation. Growing per capita income in emerging markets will also mean a larger middle class that will translate into infrastructure for manufacturing sectors that provide the raw materials for consumer goods and for more and better roads. However, though emerging economies represent the biggest opportunities going forward, CEOs are still apprehensive about the potential for slowdown in these regions. While emerging economies represent the biggest opportunities for infrastructure development and investment, CEOs worry almost as much about a slowdown in the emerging economies as they do about sluggish growth in the advanced economies.

Achieving this predicted growth decade will depend on whether emerging markets can provide the proper conditions for infrastructure development.

Besides the need for available capital, growth markets will need to reduce investor risk by establishing robust governance, a consistent regulatory framework, and political stability. Developing economies must also invest in training highly skilled and low-to-medium skilled workers to support design and construction activities.

Report: Capital project and infrastructure spending: Outlook to 2025

Asset management set for change

BY Matt Atkins

The asset management industry will be radically altered in the next 15 years, says KPMG.

A new report, Investing in the Future, makes a number predictions including that, by 2030, client bases will be fundamentally different as Generation X approaches retirement; the number of players in the global market will halve in the next five years; and big tech firms will make headway into the sector. The report also stresses that asset managers are currently behind the curve on embracing new technology.

Current business models will prove woefully insufficient, according to Tom Brown, global head of investment at KPMG international. "We are on the verge of the biggest shake-up the industry has experienced; and the message to asset managers is clear – adapt to change or your business won't survive. The two biggest issues that need to be addressed are the changing client base and technology, and asset managers need to get to work on these areas now."

Technological investment will be critically import in the coming years says the report. The future needs of clients will be fundamentally different from today, with a growing demand for personalised information, education and advice. However, businesses are currently focusing on the wrong areas.

"Asset managers still have a long way to go to recognise and exploit big data and data analytics," says Ian Smith, financial services strategy partner with KPMG in the UK. "While IT is already attracting a significant amount of investment, it is not being channelled into the right areas. Many businesses are putting their efforts into trying to unpick the complex legacy of disparate systems and technologies while trying to make sure they provide the right level of control to meet increasingly stringent compliance. There is too little focus on building the architecture to meet the business needs of tomorrow."

The report also predicts a shift in the way customers buy investment products. Online purchases are expected to increase, while 'Trip Advisor type' websites will provide buyers with greater opportunities to conduct their own research.

Report: Investing in the Future

Expansion expected in Healthcare BPO

BY Matt Atkins

According to a new report published by MarketsandMarkets, the global healthcare business process outsourcing (BPO) market is expected to see rapid growth in the next five years, doubling in size by 2018. Presently valued at an estimated $92.3bn, the market is poised to grow at a CAGR of 10.8 percent to reach approximately $188.9bn before the decade is out.

BPO is the contracting of specific business tasks such as payroll to third party services. Usually, BPO is implemented as a means of outsourcing  tasks that a company requires but does not depend upon to maintain its position in the marketplace.

The healthcare BPO market is spread across the payer, provider and pharmaceutical sectors, of which pharmaceuticals has the largest share, accounting for close to 80 percent of the market in 2013. Cost reduction is the main driver for outsourcing business functions which include HR services, finance and accounts, claims processing, medical billing and contract research. Healthcare reforms introduced by the Obama administration are also driving the market.

Healthcare BPO is divided into source and destination geographies. The US accounts for the largest share of the market, followed by Europe. The most preferred destination is India, which has the advantage of a high number of healthcare professionals, affordable cost of living, a large patient pool, and decreased time and costs for recruitment.

Overall, the healthcare BPO market is highly fragmented with many small players competing for their share, particularly in India and China, where many entrepreneurs have entered the market. The major players include Accenture, GeBBS Healthcare, Omega Healthcare, Parexel and Boehringer Ingelheim.

In recent years, the market has come under scrutiny by regulatory bodies, and regulatory change in key regions such as the US and Europe is expected to result in increased requirements for payer and provider outsourcing services.

Press Release: Healthcare BPO Market worth $188,856.5 Million by 2018