Without question, the past few years have been challenging for investment banks. In the midst of this volatility and transformation, Accenture conducted a study to identify the characteristics of high performance in investment banking. As the investment banking world changes fundamentally, it may seem like banks are chasing a moving target—but in reality, it is more important than ever to understand how acting strategically and making good choices can create a competitive advantage.
Analysis of the investment banking industry
Accenture analysed the industry using our high performing business methodology, and focused on how banks can drive success in the future. We revealed two distinct categories of high performers: scale winners and focused winners.
JP Morgan and Goldman Sachs outpaced their competitors as the scale winners, with mastery of diversification. But there were also three focused winners: Royal Bank of Canada, Santander and Standard Chartered. These banks’ smaller investment banking operations have separated themselves from the pack with high profitability, efficiency and stability.
The lesson here is that there are several routes to high performance—and that success is not synonymous with scale. In fact, we attribute the focused winners’ success to their strategic focus on certain markets and capabilities. Rather than concentrating on simply driving bigger revenue, they also focused on improving performance, profitability, efficiency, capital strength, and international management.
Focus for success
The reality of today’s market is that investment banks can no longer afford to be all things to all people. They must adopt a more focused approach, identify markets in which they can compete effectively, and above all, remain relevant to their clients. Selecting an appropriate business model is certainly part of the equation, and a recent article in The Economist highlights two broad approaches: pursuing high trade volumes, and honing in as a product or geographic specialist.
In fact, Accenture has identified five potential business models that can enable investment banks to achieve high performance. Next week, my colleague Dean Jayson will talk more about these models and how they work.
To learn more, download Focus for Success: The High Performing Investment Bank (pdf; opens in a new window).