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As part of the Investor Forum’s objective to make the case for long-term investment approaches, we have played an active role in the BankingFutures project, which was convened by two not-for-profit organisations, Leaders’ Quest and Meteos, in the summer of 2014 to rebuild a healthy UK Banking Sector.

BankingFutures was a structured dialogue aiming to create a healthy, resilient and inclusive banking sector in the UK. The dialogue took place in two phases. Phase One began in June 2014 and sought to provide civil society, customer and regulatory input to a leadership group of senior banking executives, investors and experts on banking reform.

Phase Two involved the publication of two reports in July 2017, these were:

  • Pathway to Long-Term Value: Identifying and Defining Long-Term Value Drivers for Banks. Please read in full here.
  • BankingFutures – Banking Small Businesses: Forging Closer Ties between Banks and the Real Economy. Please read in full here.

The Investor Forum co-authored the ‘Pathway to Long-Term Value’ report. The associated recommendations represent a series of tangible steps that banks and investment leaders can take to focus discussions on the issues that really matter to understand value – culture, employees, customers, risk appetite and the impact on society – and to enhance confidence. Banks can do much more to better articulate their approach to these important issues. This process has also revealed the need for a broader dialogue if investors are to understand long-term value and avoid an excessive focus on short-term issues and quarterly reports.

In December 2017, The Investor Forum published the results of a survey undertaken in response to the recommendations of the BankingFutures Pathway to Long-Term Value project. Please read in full here.

The results provided a strong signal from investors of the value of non-financial information but also the need for Banks to significantly improve the quality and consistency of the information they provide.

Banking Futures Project Results Summary

Co-authored report
Surveyed investors on drivers of long term value
Working with UK Finance to influence sector

How important are the following as drivers of long-term value?

Leadership
92% 6% 2%
Capital Allocation
92% 6% 2%
Franchise Health
84% 14% 2%
Profitability
73% 22% 4%
Growth Potential
45% 51% 4%

How do you view the quality of information that banks provide on:

Culture
6% 20% 74%
Employee Engagement
6% 29% 65%
Customer Satisfaction
10% 29% 61%
Environmental Issues
2% 39% 59%
Risk Appetite
14% 37% 49%
Conduct
6% 45% 49%
Long Term Strategy
20% 33% 47%
Purpose
12% 45% 43%

Insights that emerged from the survey of institutional investors included:

  • non-financial information provides crucial insights which can help assess how banks can create long-term value;
  • banks should reduce the emphasis on Quarterly reporting;
  • investors would appreciate focused communication through a 2 page summary of long-term value drivers.

We shared these results with a number of banks through a taskforce created by UK Finance to investigate these issues. The clarity of the signals from investors together with the commitment of an industry body are a cause for real optimism that banks can create a much enhanced contribution to this debate and provide insights to inform long-term value.

The Investor Forum’s involvement in BankingFutures over the last three years, together with this survey, provided a practical opportunity for banks, investors and other stakeholders to work together to explore how to enhance trust in banks and increase the focus on creating sustainable longterm value. Several Members participated in the project. The full reports, together with the survey results, are available on our website.

The Investor Forum will continue work with UK Finance to support bank industry initiatives to enhance non-financial information, and in particular the focus on a two page summary of long-term value drivers.

BankingFutures has revealed the value of talking and listening to the stakeholders that banks are here to serve. The sector has undergone significant structural and behavioural changes since the financial crisis – but the questions being asked by investors have not changed much. I hope BankingFutures will help change that.

John Flint, CEO
Retail & Wealth Management,
HSBC

Investor feedback: Shifting the debate

Focus on long-term value:

  • 82% of investors agreed that a 2 page summary of long-term value drivers would be valuable in all investor updates
  • 71% felt too much time is spent analysing a narrow range of short-term financial metrics
  • 67% believe that banks should reduce the emphasis on Quarterly reporting
  • Only 29% believe there is clear alignment between Asset Owner and Asset Manager timeframes
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