Bank executives most concerned about margins, deposits

Executives are most concerned about their banks losing profit due to higher funding costs, according to IntraFi’s business outlook survey of CEOs, presidents, CFOs and chief operating officers from more than 500 banks. 

Forty-two percent of bankers cited margin compression as their banks’ most pressing issue for the next 12 months, followed by 34 percent who cited deposit competition as the No. 1 risk. Eight percent listed credit quality as their most pressing issue, while 6 percent reported loan demand and cyber risk. Three percent reported asset-liability duration as their most pressing issue. 

Thirty-four percent of bankers cited credit quality as the most pressing issue for the entire industry over the next 12 months, followed by 32 percent who listed deposit competition and 22 percent who reported margin compression.  

Forty-one percent of executives listed the Consumer Financial Protection Bureau’s small business rule as their top regulatory policy concern for this year, followed by 21 percent who cited limiting overdraft fees and 20 percent who listed lower debit interchange fees.

Eighty-one percent of executives don’t expect to cut back on small business lending if the CFPB’s business collection rule is implemented, compared with 16 percent who expect to reduce their lending if the rule is implemented. Of those who expect to cut their lending, 47 percent anticipate a reduction of 11-20 percent, with 22 percent projecting a cut of up to 10 percent. Twenty percent expect to cut lending by 21-30 percent.   

Eighty percent expected demand for mortgages will moderately increase this year, followed by 11 percent who expect a significant increase and 9 percent who expect demand will remain at current levels.  

Other report findings included: 

  • Forty-seven percent said loan demand has fallen in the next 12 months, while 30 percent reported an increase. Twenty-three percent said loan demand had remained the same. Forty-three percent expect loan demand will have increased 12 months from now, compared to 23 percent who expect a decrease. Thirty-four percent expect loan demand will be unchanged. 
  • The vast majority of executives reported that funding costs had increased compared to 12 months ago. Forty-two percent predicted an increase in bank funding costs 12 months from now, compared to 40 percent who expect a decrease and 18 percent who anticipate funding costs to be unchanged. 
  • Eighty-one percent said deposit competition had increased from 12 months ago, compared to 14 percent who reported unchanged competition. Fifty-six percent expect competition to be more intense 12 months from now, compared to 33 percent who expect it to remain the same and 12 percent who expect a decrease.