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Customers and Partners,
One year ago we completed the merger of S&P Global and IHS Markit. At the center of this powerful combination is an incredible set of assets – industry-leading proprietary datasets, deeply embedded workflow solutions, differentiated distribution capabilities and world-class technology – this is S&P Global Market Intelligence.
One year in, my optimism and enthusiasm about the opportunities ahead continues to grow. Most importantly, this anniversary is a milestone we want to celebrate with you – our customers – as your trust has inspired us to deliver during a transformational year.
When I took the role as President of S&P Global Market Intelligence in March 2022, the world almost immediately shifted to a challenging landscape, with a rapid rise in inflation, sudden tightening of monetary policy, impactful supply chain disruptions, and geopolitical tensions headlined by Europe’s first land war since WWII and increasing tension between the US and China. It was clear that we pivoted from some of the most active and growing capital markets ever seen, to what would be a very different year. We saw these oncoming challenges early and were acutely aware of the economic environment businesses and our customers were facing. Our focus immediately shifted from intensive integration planning to helping customers navigate turbulent times.
According to our latest M&A and Equity Offerings report, market conditions in 2022 were historically weak. Compared to the prior year, the value of global IPOs fell 71.3, global equity issuance plummeted 66.6%, and global M&A fell 35.8%, the second lowest annual totals for M&A announcements since 2013 and lowest totals for equity issuance since 2006. This was clearly a very different market environment.
The impact of these rapid shifts continue rippling through parts of the global financial system. The banking sector and managers of capital will draw more attention with the recent collapse of Silicon Valley Bank and Signature Bank, representing the second and third largest bank failures in U.S. history. While the overall impact to the global economy of these events may be limited, the response by market participants and the rapidly shifting landscape highlight the acute need for high-quality data and analytics for effective and timely decision-making.
With uncertainty over various geopolitical issues still elevated and economists now also weighing the broader economic impact of recent banking sector volatility, initial growth projections are being revised in real-time. After a 3.0% expansion in 2022, our latest projection indicates global real GDP will increase by 2.0% in 2023 – up from the low projection in October 2022 of 1.4%. Backing the upward revision, our S&P Global ‘Flash’ Composite PMI® of G4 countries rose to 51.3 in February, pointing to global growth. The global economy will receive support from Asia Pacific's real GDP growth, picking up from 3.2% in 2022 to 4.2% in 2023, led by an acceleration in mainland China's output from 3.0% to 5.2% as pandemic-related restrictions ease. Still, tighter financial conditions are likely to continue to weigh down on activity, with recession risks still significant in the US and Europe.
The inflation environment remains challenging with major central banks signaling prior to the recent financial turbulence that they are not finished raising interest rates. Policy rates are forecast to peak near 5.25% in the United States, 4.25% in the United Kingdom, and 3.75% (the deposit rate) in the eurozone, with some downside risk should financial stresses escalate.
Across supply chains, key risks such as geopolitical tensions, inventory management and consumer demand remain. However, our analysis shows the overall resilience of global supply chains and anticipates pressure to ease in 2023 due to improved logistics and inflationary impacts.
Navigating the complexity and volatility of these market conditions presents challenges. Many of our customers have relied on some of our must-have tools including S&P Capital IQ and S&P Capital IQ Pro, and RatingsDirect, which include expertise and research from our S&P Global Ratings Division. On the solutions side, our enterprise data management tools (EDM) serve many of the largest asset managers, helping them manage financial data within their firms, and Wall Street Office (WSO), our fully outsourced managed services offering, currently covers over $800B of AUM for loan portfolio monitoring and data management - and we continue to invest heavily to improve and enhance our offerings.
As market volumes return from last year’s lows, customers are finding value in our market-driven offerings that include efficient and useful components of market infrastructure across asset classes. These include some of the most efficient and well-developed platforms in the world, on which loan trades are settled or which are used in the equities and fixed income markets for coordinating public capital markets transactions.
We have also heard from you, our customers, that receiving the right data and solutions in a timely manner through single or multiple distribution channels is vital to achieving your business objectives. Understanding the importance of time to value and time to market, customers leverage S&P Global Marketplace, providing access to over 200 datasets via Cloud, Data Feed, API Solutions and Capital IQ Pro. Many market participants continue to demand that partners meet them at their technology, requiring nimble and varied methods of data discovery, flexible distribution and workflow integration. We will continue to invest and grow in this area as we build on our market-leading distribution capabilities, leverage the latest technology and data capabilities through scaled internal expertise, and expand our partnerships with the largest technology providers in the world.
Heading into our combination, we identified key areas of growth that were driven by our customer and market demands as well as our established leading positions in these areas. Those areas include credit and risk management, private markets, sustainability, supply chain and the strategic expansion of our desktop and data capabilities. Let’s look closer at one of these growth areas.
In 2022, global private equity dry powder approached $2 trillion. Meanwhile, the number of restructurings and bankruptcy filings by private equity (PE)-backed companies in the U.S., while small, also edged higher. The rapid rise in dry powder coupled with market challenges – including the kind of shocks and need for information triggered by the recent bank collapses – has created an increased need for transparency in this space. Customers have asked for tools that help them monitor valuations and portfolios whether it be portfolio monitoring, fund-level data, reference data, valuations, benchmarking or extensive private company data. For general partners and limited partners, there is significant value in managed services, valuations and credit information – all contributing to data efficacy and efficiency, streamlined decision-making and reporting capabilities in this fast-growing market. We provide solutions to our customers in each of these areas today, with detailed investment plans to continue expanding to meet customer and market needs.
All of our growth areas align to distinct offerings in Market Intelligence that enable our customers to assess the risks and opportunities facing these markets. Whether it’s leveraging Credit Analytics to identify default probabilities or KY3P® to identify counter-party risk, assessing your physical risk or mapping your path to net-zero using our suite of sustainability data, or identifying shipping, trade and logistics using our supply chain intelligence. Adding transparency and providing trusted insights is a core objective as we continue to build on our capabilities across these focus areas.
Technology is core to our strategy and enables us to deliver the data and insights that help customers face increasingly complex challenges, more rapidly respond to market opportunities, and streamline business operations. We're testing ourselves constantly on our efficiency, our speed, and the quality of what we deliver. Every company is going through some level of digital transformation. While the financial services industry is still finding the best use-case for the likes of ChatGPT and other artificial intelligence (AI) tools, S&P Global has been leveraging natural language processing, AI, machine learning, and automation for several years.
In 2018, we acquired Kensho, which today powers several of our Capital IQ Pro capabilities including Scribe, NERD, and Link. We’ve leveraged advanced technology in our insights with Natural Language Processing and in developing sentiment scores for earnings calls, adding a new dimension of alternative data. Our technology stack allows us today to deliver through APIs, feeds, our desktop or the cloud. Today, three out of every four of our applications run in the cloud, and that number will continue to rise, particularly fueled by the recent announcement of our multi-year strategic collaboration with Amazon Web Services (AWS). This collaboration will create new insights, risk assessments, and predictive modeling, while bolstering our cloud infrastructure and expediting data delivery across every part of S&P Global. It will also lead to new offerings as we explore the full potential of our relationship with AWS.
Scalable technology is also crucial for our internal operations as it increases our speed to market. We implemented robotic process automation (RPA) several years ago across our data organization, which vastly transformed the speed and quality of our data discovery and distribution. More importantly, RPA allowed time for our people to focus on value-add work. These types of innovations in our technology and data capabilities don’t stop internally - we also share the value of these benefits with our customers. We understand that your business is driven by clients and their needs and that there’s a continuous necessity to deliver more efficiently. In fact, this very topic recently fueled a new dimension to our engagement with a long-time customer, Piper Sandler, and the launch of a “bot-a-thon.”
We worked closely with Piper Sandler’s investment banking teams in 2022 to examine their daily workflows, which allowed us the opportunity to serve their growing teams in a new way. The Piper Sandler technology team was already deep into increasing automation and saw an opportunity to discover the best use-cases for the firm’s investment banking teams. While they are still driven by client and market-demand, Piper Sandler transformed how they achieved their business objectives by increasing efficiency through automation. Through the “bot-a-thon,” we worked with Piper Sandler’s technology team and investment bankers to look at potential automation use-cases and supplement them with bots and digital skills. This uncovered some of the time-consuming and replicable tasks that when automated, enabled teams to dedicate more time to innovative thinking and analytical work. Or as Chad Burton, Piper Sandler’s Investment Banking COO said, “I’m trying to create an environment that reduces tedious tasks to allow people to work on things they value.” The added benefit of course is the concurrent shift in focus to a more strategic and innovative culture.
Information services as an industry is rapidly evolving and you will continue to see Market Intelligence leverage advanced technologies to deliver better data and workflow solutions. Our foundational capabilities of data and technology underpin everything we do. RPA and our evolving customer relationships serve as examples of how we’ve been able to pass these efficiencies to customers to help achieve business priorities.
It’s been an exciting and momentous first year at the helm of this incredible business. We’ve launched new and exciting capabilities like PVR Source and Onboarding Accelerator. We’ve enhanced several of our existing capabilities such as adding economic and country risk data for Capital IQ Pro. We’ve bolstered our charting capabilities and improved our third-party risk tools. We’ve furthered our partnership with Novata to bring more transparency to sustainability efforts in private markets. These announcements only scratch the surface of our progress throughout this first year as our 18,000 incredible Market Intelligence colleagues across the world have brought a relentless focus to serving our customers’ needs.
We held our first investor day post-merger in December last year where I shared that Market Intelligence has an unparalleled global customer base across varying markets, sectors and geographies. You – our customers – are our most important strength. You fuel us to drive innovation and together we generate new ideas. Our promise to you is we will always be here to listen to your challenges and we will tirelessly refine and re-invent our products and services to ensure they equip you to achieve your business objectives.
A sincere thank you for putting your confidence in Market Intelligence through our first year. Your trust in our capabilities to help you manage through the noise is what continues to pave our path forward. Our mission is to be the foremost provider of information services and solutions to global markets. To achieve it, we will keep innovating and striving to deliver the best-in-class data, technology and workflow solutions that serve your needs and Power Global Markets.
President, S&P Global Market Intelligence