In light of new regulations that force banks to cut down their research earnings, Commerzbank -- which is the second largest bank in Germany -- is looking to artificial intelligence to write its earning reports. Previously, the same technology was used to write quick reports on soccer matches or political events such as elections.
The German bank worth $525 billion is working on this project with Retresco, a content automation company in which Commerzbank invested two years ago through its fintech incubator.
Speaking to the Financial Times, Michael Spitz, who is head of Commerzbank’s research and development unit Mainincubator, said that this kind of technology shows great promise because “equity research reports reviewing quarterly earnings are structured in similar ways.” What's more, these kinds of documents are often prepared under common reporting standards, which are easily read by machine learning algorithms. In other words, there's a lot of routines and robotic mechanics that an AI might handle just as well if not better than a human -- it would certainly be faster and more productive, capable to writing reports on the fly, for instance.
According to Spitz, this technology is "already advanced enough to provide around 75% of what a human equity analyst would when writing an immediate report on quarterly earnings." However, the AI is nowhere near good enough to be able to produce content for clients -- this kind of custom writing might take a lot more time and development to supersede. So, if you're working as a bank analyst, don't be too worried.
“If it is related to much more abstract cases, we feel that we are not there yet — that we can or maybe will ever replace the quality of a researcher,” Spitz added.
But that's not to say that an AI can't handle some of these so-called abstract cases. For instance, an AI developed by Japanese researchers wrote a novel that nearly won a literary award. Here's an excerpt, from the book called The Day A Computer Writes A Novel.
“I writhed with joy, which I experienced for the first time, and kept writing with excitement.
“The day a computer wrote a novel. The computer, placing priority on the pursuit of its own joy, stopped working for humans.”
Many banks are eager to cut research spending following the implementation of European investor protections known as Markets In Financial Instruments Directive (MiFID II). The regulations that came into effect earlier this year are designed to increase transparency across the European Union's financial markets and standardize the regulatory disclosures required for particular markets. Some of the MiFID measures include pre- and post- transparency requirements, as well as new standards for financial firms.
As a direct consequence of MiFID, investors are forced to pay for research explicitly instead of bundling its costs into trading commissions. For some firms, their research revenue has fallen by as much as 30 percent as a result. Commerzbank hopes that AI will help offset some of its losses.
