It is easy to compare the cost income ratio’s (CIR) for the global banks ranging from 30% to 90% and to make some fairly common sense observations on levels which are unsustainable and that require more radical changes to business models, culture and approach. It is far harder to develop comparative analysis on tech spend by global banks even though this is one of the most critical determinants of their future relevance and viability.
JPM spent $10.8b on tech in 2018 and is projecting an increase of $0.6b in 2019. That’s around 10% of total revenues ($111.5b) and around 25% of pre-tax income. Around 50% of the total spend is on current support and 50% on “change-the-bank” or transformation. JPM CIR is 57%. So now we have a straw man to use for other banks.
The UK & EUR banks with CIR >75% do not have sufficient capacity for transformation spend, particularly while they are also trying to return more capital to shareholders. For these banks the quantity of transformation spend has to increase - and then be directed effectively. That requires more radical action on legacy costs.
The global banks in the 45-65% CIR range have available funds and need to make the transformation tech investments count. For them it is about the quality of transformation investments.
For the Chinese global banks and Asia regional players with cost income ratio <45% transformation investment will be their defining strength.
source links below
https://www.ft.com/content/06ead662-3f88-11e9-9bee-efab61506f44
https://www.jpmorganchase.com/corporate/investor-relations/document/2019_firm_overview_ba56d0e8.pdf
https://www.moodys.com/research/Moodys-Global-investment-banks-need-to-become-agile-to-tackle--PR_392185