Project Blue

diciembre 2012

www.pwc.com/mx

Project Blue2PwC

Project Blue framework

diciembre 2012

AD

AP

TP

LA

N

Global instability

Regulatory enviorenment Fiscal pressures Political and social unrest

Rise and interconnectivity of the emerging markets (SAAAME) Demographic change

Social and behavioral change

Technological change

War for natural resources

Rise of state-directed capitalism

Economic strengthTrade FDI

Population growth discrepanciesAgeing populations

UrbanizationGlobal affluenceTalent

Disruptive technologies impacting FSDigital and mobile

Oil, gas and fossil fuelsFood and waterKey commodities

State interventionCountry/city economic strategies

Capital balancesResource allocationPopulation

Changing family structuresBelief structures

Changing customer behaviors - Social mediaAttitudes to FIs

EcosystemsClimate change and sustainability

EcosystemsClimate change and sustainability

Investment strategies SWFs/development banks

Project BluePwC 3

How different is banking from other sectors?

diciembre 2012

Pre-crisis banks were in line with other sectors in how they shared the pie, allowing for capital intensity, but post the financial crisis

• To compare compensation across industries, you need to look at balance of capital versus labour

 • Ratio of compensation to

profit pre compensation enables us to do this

 • Industries requiring more

capital have to pay a lower proportion of profits in compensation costs

 • This measure helps us assess

impact of rising capital requirements in bankingSources: Bank scope 2001 - 2007 (no adjustment made for FVOD by Bank scope)

Published annual reports for 2010 (for consistency with Bank scope, no adjustments made for FVOD)

Project Blue4PwC

The Project Blue framework – banking reward

diciembre 2012

Political and social unrest•Bank pay as a populist issue (EU)•Potential government intervention•Political pressure on shareholders

Regulatory environment• Remuneration regulations (G20)• EU ‘leading’ in 3-speed world - focus on pay structures

• Focus on risk-adjusted performance

Social & behavioral unrest• Expectations of employees• Motivational effect of incentives• A challenged reward model

 

Rise of the emerging markets• SAAAME leading in 3-speed world

• RoE pressures in developed markets

• Pressure on ‘one-bank’ pay model

Project BluePwC 5

The Project Blue framework – banking reward-

RoE pressures• Bonus pool reductions since the financial crisis - more to come, but limited

scope

• Support function costs and erosion of the investment banking premium

• Investor looking for more structured funding guidance

RoE pressures• Divergent economic and regulatory environment in Europe, US and

SAAAME

• Emergence of regional pay practices

• Death of the ‘one bank’ pay model?

A new approach to rewarding talent needed• A tainted sector

• Traditional pay models are no longer fit for purpose

• Requirement to rebuild a sense of purposediciembre 2012

Project BluePwC 6

Investors are increasingly vocal on the pay question -returns being a key reason

diciembre 2012

Project BluePwC 7

Investors are increasingly thinking in terms of the “share of the pie”

Investors have been increasingly vocal on bank pay policies this year

diciembre 2012

TaxEmployees

DividendsRetaine

d earning

s

Project Blue8PwC

Project Blue framework

diciembre 2012

AD

AP

TP

LA

N

Global instability

Regulatory environment

Fiscal pressuresPolitical and social

unrest

Rise and interconnectivity of the emerging markets (SAAAME) Demographic change

Social and behavioral change

Technological change

War for natural resources

Rise of state-directed capitalism

Economic strengthTrade FDI

Population growth discrepanciesAgeing populations

UrbanizationGlobal affluenceTalent

Disruptive technologies impacting FSDigital and mobile

Oil, gas and fossil fuelsFood and waterKey commodities

State interventionCountry/city economic strategies

Capital balancesResource allocationPopulation

Changing family structuresBelief structures

Changing customer behaviors - Social mediaAttitudes to FIs

EcosystemsClimate change and sustainability

EcosystemsClimate change and sustainability

Investment strategies SWFs/development banks

Project Blue9PwC

Project Blue assesses the impact of these changes on all aspects of the leadership agenda… (1 of 2)

diciembre 2012

Project BluePwC 10

…suggesting a hierarchy of core organizational impacts to consider...(2 of 2)

The Project Blue hierarchy of core organizational impacts

diciembre 2012

Pro

ject

Blu

e d

rive

rs 1. The future of the industry

2. The company’s ambition and visión*

3. Growth 4. Risk **

5. Technology***

6. Organization 7. Stakeholder management

****

Thank you...

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