2022 KPMG Inflation Survey: Banking Report

How banks are managing the impact of rising costs in a volatile operating environment

Inflation prompts multifaceted response by banks 

With inflation at a 40-year high and multiple shocks disrupting the financial and business landscape, some of the largest banks in the United States say they are employing a multiple-front strategy to help manage the impact of rising costs in this volatile operating environment. As they work to manage the impact of inflation on their own businesses, banks should also view this challenging environment as an opportunity to provide more high-value financial advisory and financial infrastructure services to customers.

 
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Survey highlights

  • 62% cite unforeseen geopolitical risks as a top organizational challenge in MANAGING impacts of inflation
  • 82% expect to raise prices by the rate of inflation (52%) or more (30%)
  • 72% envision passing on price increases in three to six months
  • 74% are looking at right-sizing staff as a means of offsetting the impact of inflation
  • Nearly 40% plan to allow all employees to work remotely to reduce real estate and related spending
  • 65% anticipate increasing their technology spend by 5% to 20% to mitigate inflationary impacts


Accelerating top-line growth
Despite falling consumer sentiment, 82% of companies expect to raise prices by at least the rate of inflation. At the same time, nearly 60% may look to develop new products at lower price points in an effort to maintain or increase customer wallet share.


Protecting the bottom line
In the face of wage inflation, companies are re-evaluating the right size, structure and location of their workforce. They are considering workforce reductions (48%), cuts in non-salary compensation (47%) and relocating staff to lower-cost regions (53%), while also exploring refinancing (54%).


Planning for exogenous factors
With unforeseen geopolitical risks leading the list of organizational challenges, companies are realizing that “dark swans” are lurking everywhere. They are factoring geopolitics into their risk planning, on-shoring or near-shoring more functions, and building resilience into their supply chain and foreign exchange processes.


Responding with technology
With headcount reductions and right-sizing programs looming, companies expect to counter the potential hit to productivity with technology. Among respondents, 65% expect to increase tech spending by 5% to 20%, with AI, machine learning, blockchain and cloud computing increasingly seen as inflation-fighting investments.

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Key Survey Findings

       

Technology spending

Spending on digitization of operations is an increasing priority.

Nearly all banks surveyed are increasing technology spending this year – anywhere from 5% to almost 20% compared to 2021.
 

  

Rising wages & workforce

Wage inflation and workforce matters have moved up on bankers’ agendas.

Rising wages are adding to banks’ cost pressures – many institutions are weighing the need to attract and retain talent against spending concerns.

   

Office-space leasing issues

Office-space leasing issues are consuming more of management’s time.

90% of banking respondents said they would allow full-time remote work.

 

   

Political instability & credit risk

Global political instability could spark increasing credit risk

Geopolitical risks have significant implications relating to exchange-rate fluctuations and operational planning as a result of global supply-chain disruption.

   


Read the full 2022 KPMG Inflation Survey

From bottom line to top line, inflation is top of mind across all industries. The 2022 KPMG Inflation Survey captures a long-term view of how inflation is impacting strategic decisions and corporate behavior.

  

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Our Team

Meet our trusted partners who can answer questions regarding inflation and help you plan for unpredictable factors.  

Peter Torrente

Peter Torrente

National Sector Leader, Banking & Capital Markets, KPMG US

+1 212-872-5815
Alysha Horsley

Alysha Horsley

Partner, Audit, KPMG in the U.S.

+1 704 370 4368
Dylan Roberts

Dylan Roberts

Principal, Advisory, Strategy - PDT, KPMG US

+1 212-997-0500