Healthy outlook from US banks is good news for Indian IT firms

India’s IT services industry is expected to benefit this year from improved business commentary and a healthy outlook on technology spending by large US banks, analysts have said.

US banks, including Citibank, JP Morgan, Goldman Sachs, Wells Fargo and Bank of America have said they would continue to invest in technology to improve internal efficiencies and towards new products and services.

“Improvement in US BFS (banking and financial services) revenue environment and stable commentary on IT spends may provide a sustainable setup for Indian IT companies in calendar year 2020,” said Aniket Pande, an analyst at brokerage firm Prabhudas Lilladher.

“US banks’ commentary seemed more optimistic compared to the last three quarters… (they) had a good quarter and are more optimistic on revenue environment due to improvement of US-China trade discussions and uptick in consumer spending,” he added.

BFS is the largest revenue generator for India’s IT industry, with more than a third of its revenue coming from this sector.

Global spending on IT by banks is expected to touch $309 billion by 2022, according to a March 2019 study by researcher Celent. Banks in North America are expected to spend nearly $120 billion, a growth rate of 4.6% from 2019, it said.

“Overall BFSI revenues have begun to bounce back for the sector,” analysts Ankur Rudra and Aayush Gupta of JP Morgan said in a note.

Technology spending has been rising in the largest banks and the top regional banks in the United States, and this has improved the contribution to incremental revenues and growth across Indian IT, according to the analysts.

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