One clear theme has emerged from the Q2 bank earnings season: artificial intelligence (AI) costs are rising fast, wrote AI research firm Evident. Meanwhile, cost savings or revenue upside from the investment are still elusive, at least from the results the banks are putting out.
Analysts pulled on that thread in their questions, forcing bank leaders to justify the strategic pivot to this technology.
- Bank of America expects to spend $4 billion on tech initiatives like AI in 2024, a 5% increase on last year. AI had “moved from cost savings ideas to enhancing the quality of our customer interactions,” CEO Brian Moynihan said.
- Asked how Goldman Sachs would boost productivity with AI, CEO David Solomon listed AI assistants for analysts and coding tools.
- Citi’s tech spend will rise to $3 billion, said CFO Mark Mason. Last year, the bank’s overall expenses rose 6% year on year, in large part driven by technology costs.
- Nordea CEO Frank Vang-Jensen, who hadn’t talked about AI in earnings calls before, said that tech and AI spend had “increased significantly to a high level.” The bank is staying on course and expects the investment to deliver long-term, he said.
- On J.P. Morgan’s call Wells Fargo analyst Mike Mayo offered a probing question: “if you’re spending $17 billion a year to improve the company, if you’re gaining share with digital banking, if you’re automating the back office, if you’re moving ahead with AI… why wouldn’t those returns go higher over time? Or do you just assume you’ll be competing those benefits away?” CFO Jeremy Barnum responded “it is a very, very, very competitive market. And we are very happy with our performance.”
“Twenty-two of the Evident AI Index 50 banks have held Q2 calls, and AI was mentioned in 15 of them. That’s a higher share than we’ve seen before. Clearly expectations for returns from the market are growing in line with costs,” Evident wrote in its Brief newsletter.