Thursday, June 7, 2012

Survey: Mortgage troubles, regulatory pressure still weighing on bank profits

Bank executives are working to streamline operations and cut costs as regulatory pressure and other troubles hamper profits, according to a recent study from KPMG.

The audit, tax and advisory firm's Banking Outlook Survey this week found nearly 70 percent of respondents called regulatory and legislative pressure the most significant barrier to growth over the next year. More than 40 percent said bank management will spend most of its time and energy in the next two years on initiatives related to boosting efficiency and reducing costs.

"Banks are still in recovery mode after the financial crisis and coming to grips with the new regulatory environment," said Brian Stephens, who leads KPMG's banking and capital markets practice. "... The new normal for the industry seems to be slow and steady growth as banking leaders streamline costs and evaluate strategies to drive future revenue."

Executives' outlook for revenue and lending was mildly optimistic, according to the study, which reflects the responses of 100 senior banking executives. Almost 70 percent said they expect moderate revenue growth in the year ahead, driven in part by core banking services, cross-selling and asset and wealth management.

Troubled mortgages, new regulations and capital requirements are among the hurdles that remain, executives said.

Meanwhile, 80 percent of survey respondents plan to increase commercial lending in the coming year, while 84 percent said they will increase consumer lending, KPMG found.

Banks anticipate modest hiring, too, with gains largely dependent on the mix of businesses within each bank. And overall, bank executives expect the economic picture to brighten in the coming year, the study found.