Technology investments by corporate and investment banks increased 5.4% last year and now account for approximately 20% of overall spending.

Revenues for the top 12 corporate and investment banks have grown at an average compound annual growth rate of 5.2% for the past four years. Revenues peaked in 2021 helped by government stimulus and the pandemic recovery but slowed in subsequent years as inflation and interest rates rose.

Over that same four-year period, overall spending rose by 12.1%, putting total outlays for the 12 leading corporate and investment banks at $139 billion in 2022. About half of that spending (48%) was allocated to the front office, primarily on people (compensation and benefits), and the other half (52%), or $72.2 billion, was devoted to functional expenses including operations, technology, control, and other support functions.

Over the past 12 months, spending on technology has increased the most, at 5.4%, and now accounts for approximately 40% of all functional area spending and 21% of spending overall.

“Corporate and investment banks are balancing the need to grow their business with the need to invest in systems to create efficiencies through automation that enhance the client experience and accommodate new regulations,” says Stephen Bruel, Senior Analyst at Coalition Greenwich Market Structure & Technology and author of Corporate and Investment Banking: Spending Priorities.

Regulation, Compliance, and Risk and Controls Growing as Cost Drivers
An ambitious slate of regulatory proposals and rule implementations has made regulatory compliance and risk control increasingly important cost centers for investment and corporate banks. Not only do firms need to spend on the expertise to manage new regulations, but they must also invest in the systems required to ensure compliance and effective risk management.

“Investing in obligatory projects like compliance may not always generate excitement, but banks are required and increasingly incented—through the reputational risk of non-compliance—to keep these initiatives front and center,” says Stephen Bruel.

Corporate and Investment Banking: Spending Priorities analyzes revenue and cost trends among the 12 largest corporate and investments banks and examines spending by size of institution and breaks down cost allocations across organizational functions. The report pays special attention to factors like technology and regulatory compliance that are increasingly driving costs for the biggest corporate and investment banks.

Source: Coalition Greenwich