M&A remains a strategic priority for banking executives despite a less supportive operating environment.
ccording to the EY Global Capital Confidence Barometer, the majority of banking executives surveyed don’t anticipate a global recession. Despite ongoing geopolitical uncertainties, continued trade tensions between the US and China, as well as between the US and the EU, a still unresolved Brexit situation and a series of evolving regulatory challenges, 74% of banking executives surveyed still believe the global economy is growing. And 60% do not expect an economic slowdown in the near to mid term. However, their confidence in macroeconomic fundamentals is more tempered. In particular, they are feeling less positive about corporate earnings (45% feel positive versus 77% a year ago) and credit availability (57% feel positive versus 72% a year ago).
While geopolitical uncertainty and regulatory issues remain top-of-mind external risks to the growth of their business, increasing competition from existing competitors and a shortage of talent are creating pressure from within. For 60% of banking and capital markets executives, hiring and retaining talent is of considerable concern. More than one-third are struggling to find talent with specific technical skills relevant to their core business. Slightly less than one-third say they are challenged to find talent at all levels.
M&A efforts in banking and capital markets focus on expanding geographic footprint and addressing the talent shortage
Forty-one percent of banking executives indicate that they will actively pursue M&A in the next 12 months, down from 58% 6 months ago, but still slightly above the historical average. While expectations for improvement in the M&A market are also down from the last two previous M&A surveys, nearly half (48%) are anticipating that the M&A market will improve over the next year.