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Motilal Oswal Report
As we anticipated in an earlier edition of this note, technology spending at the top global banking financial services and insurance (BFSI) firms indeed surprised in Q2 CY20.
Growth in aggregate technology spend in the five key U.S. banks – JP Morgan, Citigroup, Bank of America, Morgan Stanley and U.S. Bancorp – accelerated to 7% YoY in June 2020 (versus 5% in March 2020).
Barring CitiGroup, spending growth trends at other four banks were robust (9–14%, YoY). Compared with Q1 CY20, growth (YoY decline) in technology spend accelerated (moderated) across most of the key European BFSI firms (e.g., Credit Suisse, UBS, and Banco Santander).
Adjusted for one-offs and non-cash items, while technology spend at Deutsche Bank remained stable, that at Barclays declined. For numerous enterprises globally (including BFSI), tech spending decisions over March-June 2020 were largely reactive, rather than proactive.
In the wake of the Covid-19, firms were compelled to incur certain one-time spends to ensure business continuity. These included the purchase of hardware, software licenses and cloud migrations for remote work access etc.
Similarly, as global banks struggled to cope up with the herculean task of distributing stimulus funds within a short time frame, we understand a number of them had to make one-time investments toward reconfiguring their systems. These spends were one-time events and are unlikely to recur going forward.
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