BFSI vertical set for recovery in H2

Green Shoots

n In Q3, management of IT firms indicated about possible recovery

n Most big firms witnessed fall in growth during Q3

n US Fed’s rate cut seen as major factor behind growth prospects

Bengaluru: Recovery in the all important BFSI (banking, financial services & insurance) vertical is not likely before June of 2024 despite some IT firms witnessing green shoots in their financial services business during the third quarter.

“At this time, we do not see a full-scale banking recovery in the cards for the next two quarters,” Peter Bendor Samuel, CEO of global consultancy firm, Everest Group, told Bizz Buzz.

In the recently concluded December quarter, some large firms have shown confidence of likely recovery in the BFSI vertical in coming quarters.

“Consulting business is showing some green shoots. We are starting to see early signs of a return to growth in consulting, as demonstrated by the double-digit growth in order bookings in our Capco business. If market improves tomorrow, this business will be the first to post high growth,” Thierry Delaporte, CEO and MD of Wipro said during the Q3 press conference.

Similarly, Tata Consultancy Services (TCS) has also shown optimism with regard to growth prospects in the financial services vertical.

“We believe that there will be a positive momentum for us in BFSI vertical in the next quarter. Coupled with some of the deals that we have won, I think that should also ramp up in the coming quarter in the Q4 and Q1 of fiscal 2025. This makes us feel that BFSI will actually return to growth, at least in our portfolio of clients that we have,” TCS COO, N Ganapathy Subramaniam said during the Q3 earnings call.

During the third quarter, all big firms witnessed a fall in growth in their BFSI verticals. This was majorly driven by slowdown in the US market. Notably, BFSI vertical contributes more than 30 per cent of total revenues of big firms.

In December quarter, Wipro, which drew 32.7 per cent in total revenue, saw its BFSI vertical falling 4.3 per cent in sequential term. BFSI vertical saw a fall of three per cent during this quarter. Similarly, Infosys saw its financial services vertical declining of 5.9 per cent year-on-year basis.

Growth of US-headquartered banks and other financial institutions were subdued in 2023 owing to sharp rise in interest rates by the US Federal Reserve. Most affected segments within financial services were mortgage, investment banking, and related segments. However, recent announcement by the US Federal Reserve to cut interest rates at least thrice in 2024 has raised hopes regarding recovery towards the later half of the year.

At this time, we don’t see a full-scale banking recovery in the cards for the next two quarters

- Peter Bendor Samuel, CEO, Everest Group, tells Bizz Buzz