Investment Banking Trends 2023: Sustainability and Digitalization

By Women in Finance

In our #TrendingData issue on the occasion of International Women's Day, we analyzed the growing visibility of women in the banking and financial services sector. For this, we focused on #WomeninFinance with Luisa Gomez Bravo, Global Head of BBVA Corporate & Investment Banking, and various colleagues and #BBVACIB leaders in the geographies in which we operate.

During the conversation with the heads of various units and participants of our talent attraction program for recent graduates, we were able to identify some of the trends that, according to the team, will shape 2023 in investment banking.

Sustainability

A sustainable and SDG-aligned approach to every initiative, solution and product will be key, with a special focus on the energy transition. Financial institutions will also focus on ways to optimize their business strategies and operations to support long-term growth, drive effective risk management and contribute positively to the environment.

According to Natalia Martínez, head of Global Transactional Banking in Colombia: "The most important focus for 2023 is sustainable banking aimed at climate action and inclusive growth. Focusing our efforts with clients on project finance and corporate finance, Sustainable Supply Chain Finance, transactional banking activity, ESG bonds, and sustainable investment products."

María Fernando Hurtado, Corporate & Investment banking analyst in Peru, explains:"We will see a trend to promote sustainable financial products that are very much focused on supply chain finance and sustainable factoring."

Macroeconomics and global geopolitical developments

Rising interest rates make financing more expensive, while widespread cost increases in goods and services, energy prices, and geopolitical tension, among other major global developments, impact the real economy and thus market dynamics. A more complex and challenging scenario is expected in this regard.

Almudena López Blas, Head of Investment Banking & Finance in Europe, Turkey, Asia and South America, points out: "2023 will be a challenging year for the banking sector and in particular for investment banking. With sustainability as the main challenge, there are also economic challenges, such as rising interest rates, inflation and the fear of a prolonged recession, and political challenges, in certain countries with tensions or on the verge of elections".

Regina Gil, Head of Global Credit, agrees: "There is a new global paradigm of high inflation and high interest rates. This makes banks profitable again but will have an impact on how companies invest. The return on investment is not the same with 0% financing as with 5% financing."

Digitalization and cybersecurity

Data analysis, the sophistication of software, the emergence of new AI-based technologies, the advance of digitalization processes in banking and fintech operators are creating a scenario in which the importance of creating digitalized and secure banking environments for the user and for the banks themselves becomes vital. In addition, greater digitalization allows for greater banking penetration of the population, so we must be prepared for the potential risks that this may entail.

According to Lei Li, Head of Corporate Banking in China: "In the face of increased digitization, financial institutions must prioritize protecting customer data and funds from unauthorized access and cyber-attacks. They must use the most advanced technologies and analytics to create a secure banking environment for customers and their assets."

Need for rapid adaptation

Quick reaction and flexibility to face a different and complex market environment without losing customer proximity will make the difference. It will be increasingly necessary to tailor solutions to each of their needs.

"We must be prudent and have a quick reaction capacity to face the scenario we are experiencing globally of high inflation coupled with high interest rates and how this impacts the growth of companies and investment banking clients", explains Iliana Patricia García, Head of Operations CIB at BBVA Mexico.

Verónica Incera, Head of BBVA CIB in Argentina, reports: "Investment banking activity this year will be very different in each country, but there are common impact factors: global inflation, the changing geopolitical situation, and the global commitment of companies and governments to reduce emissions. These will shape the focus of investments in 2023."