Capital Markets planning: assessing outcomes
Banks reviewed here met most of their ‘firm’ cost/headcount reductions and RWA/funding targets, but also largely missed their revenue/profitability targets. This, we believe, is primarily a reflection of the turbulence in capital markets in recent years.
Banks struggled to contain their costs in the early post-crisis years: only Citigroup, Deutsche Bank and UBS reported FY10 costs significantly below the FY07 level. Data for Barclays and J.P.Morgan is not directly comparable due to the transformational mergers/takeovers, but the two banks’ cost dynamics during this period suggests that both would have favoured investment over severe cost-cutting.
In more recent years, as revenue generation slowed down and the outlook deteriorated, banks (re-)focused their efforts on cost control: only the three ‘early movers’ (Citigroup, Deutsche Bank and UBS) reported their cost base at or above FY10 level. Cost-cutting – alongside headcount reductions, RWA and capital targets – features large in medium-term outlook for most banks included in this note.