GCC Financial Services Predictions For 2020

With the year 2020 expected to be a turning point for many industries in the Gulf region, Head of Financial Services (MEA) Mathieu Vasseux shares his four predictions for Financial Services in the Middle East:

  • GCC ongoing fiscal consolidation and Lower for Longer rates are putting pressure on revenues
    • Fiscal consolidation drive-by GCC governments enables long-term sustainability for their economic and social goals, however, it shorter-term bank revenues are under pressure
    • The Fed and major central banks have lowered rates mirrored which feeds into GCC rates environment and puts further pressure on the margins
  • This lower revenue growth will continue to shift focus towards Cost and Mergers as main source of bottom-line uplift
    • Bottom-line main drivers will be inorganic growth and cost optimization
    • We already observe a material wave of M&A activity across the GCC markets and expect consolidation to continue in the short- to mid-term
    • Cost is starting to become a core component for the regional bank CEOs , also linking into digital efficiencies
  • Digital moving at the forefront both for Neobank challengers and Incumbents defending against the new entrants
    • The Middle East is seeing an increasing inflow of fintech companies challenging the incumbent banks through better flexibility and better catering to millennials’ needs
    • Incumbent banks still have a large competitive advantage to prevent disruption from new entrants by re-thinking their business models and investing in digital capabilities
  • Credit quality and funding remain areas of attention as the economic cycle could start to turn
    • Concerns remains of timing of next recession, they are accentuated with COVID-19 outbreak hitting some of the world’s largest economies
    • Some sectors are already showing early signals of deteriorating cash flows which might lead to a worsening of credit quality and putting higher pressure on the banks’ liquidity levels

You may also read Oliver Wyman’s 23rd annual State of the Financial Services Industry report here. The report is broken into three sections -- investor pressure, the closing window to deliver, and how companies can make the vision/value mindset collision work for them.