Financial services bosses are confident on their second-quarter results, according to a survey of more than 150 senior executives, despite the squeeze from inflationary pressures and higher interest rates forcing them to cut costs.
An Opinium poll commissioned by KPMG found 88 per cent of leaders were “confident” about overall business growth for the period between April and June, ticking up one per cent from its previous survey in January.
Around 87 per cent had a positive outlook on profitability – a four percentage point improvement from January.
Optimism among bankers rose five percentage points to 94 per cent, while confidence among asset and wealth managers fell to 83 per cent from 89 per cent. Meanwhile, 79 per cent of insurance executives were confident on the next quarter.
Financial services firms continue to feel squeezed by interest rates being at a 16-year high and inflationary pressures that have pushed up operational costs, forcing them to draw up cost-saving plans.
Nearly 40 per cent of leaders named cost pressures as the biggest challenge facing their business in the coming quarter, followed by inflationary pressures and borrowing costs.
More than a third of leaders planned to reduce costs through reviewing suppliers (37 per cent) and generative AI (35 per cent).
Nearly a quarter (23 per cent) planned to make savings by cutting jobs and reigning in hiring, altering their real estate footprints and reviewing staff pay.
Karim Haji, global and UK head of financial services at KPMG, said: “The start of the year saw renewed growth for the economy and forward-looking indicators point to further signs of recovery, which may well be the reason for continued optimism among leaders in the sector.
“However, while financial services leaders are keeping an optimistic outlook, they do so with caution as costs are still a concern, and the sector continues to eye up savings in response to economic pressures.”
Two-third (67 per cent) of leaders felt positive about how this year’s general election will impact financial services.
They ranked boosting the City’s competitiveness, improving financial services’ regional footprint and balancing the risk and rewards of AI as the most important parts of government policy on the sector.
Haji added: “Regardless of the political environment and while the economy is showing some signs of recovery, the coming months will continue to be challenging. Not only does the sector need to remain resilient now, but it also needs to look longer-term and invest in ways to boost productivity through technology, effectively respond to regulatory demands and build sustainable business models.
“This will all be an essential driver of growth and will lay solid foundations for competitiveness as the economy rebounds.”