March 6 (Bloomberg) -- International Business Machines Corp.’s Watson computer, which beat champions of the quiz show “Jeopardy!” a year ago, will soon be advising Wall Street on risks, portfolios and clients.
Citigroup Inc., the third-largest U.S. lender, is Watson’s first financial services client, IBM said yesterday. It will help analyze customer needs and process financial, economic and client data to advance and personalize digital banking.
IBM expects to generate billions in new revenue by 2015 by putting Watson to work. The technology giant has already sold Watson to health-care clients, helping WellPoint Inc. and Seton Health Family analyze data to improve care. IBM executives say Watson’s skills -- understanding and processing natural language, consulting vast volumes of unstructured information, and accurately answering questions with humanlike cognition -- are also well suited for the finance industry.
Financial services is the “next big one for us,” said Manoj Saxena, the man responsible for finding Watson work. IBM is confident that with a little training, the quiz-show star that can read and understand 200 million pages in three seconds can make money for IBM by helping financial firms identify risks, rewards and customer wants mere human experts may overlook.
Banks spent about $400 billion on information technology last year, said Michael Versace, head of risk research at International Data Corp.’s Financial Insights, which has done research for IBM.
Watson the financial assistant will be delivered as a cloud-based service and earn a percentage of the additional revenue and cost savings it is able to help financial institutions realize. Watson, including its work in the health- care and finance industries, will contribute “a portion” of IBM’s target of $16 billion of analytics revenues in 2015, Saxena said, and that portion will “have a B next to it.”
Watson may add $2.65 billion in revenue in 2015, adding 52 cents of earnings per share, Ed Maguire, an analyst at CLSA in New York, estimated in a November research note.
IBM, the world’s biggest computer-services provider, reported revenue of $107 billion in 2011 and earnings of $13.06 a share. The company ended 2011 with $11.9 billion in cash.
IBM shares closed above $200 for the first time yesterday, factoring in stock splits. The stock fell 1.7 percent to $197.26 at the close in New York today.
Language of Wall Street
Watson “can give an edge” in finance, said Stephen Baker, author of books The Numerati and Final Jeopardy, a Watson biography. “It can go through newspaper articles, documents, SEC filings, and try to make some sense out of them, put them into a context banks are interested in, like risk.”
In addition to Citigroup, Armonk, New York-based IBM has been working with financial institutions teaching Watson the language of Wall Street, and adding content including regulatory announcements, news and social media feeds. IBM won’t say which other institutions Watson is already working with.
“It’s not selling them software, it’s selling them outcomes,” Saxena said in a phone interview.
Watson offers a “more global” picture by looking beyond financial data, Saxena said. For example, Watson can comb 10-Ks, prospectuses, loan performances and earnings quality while also uncovering sentiment and news not in the usual metrics before offering securities portfolio recommendations. It can also monitor trading, news sources and Facebook to help a treasurer manage foreign exchange risk.