Rising inflation, the war in Eastern Europe, and the possibility of new regulations caused community banker confidence to fall during the first quarter of this year, according to the Community Bank Sentiment Index.
The Conference of State Banking Supervisors survey, released April 6, revealed a negative sentiment index of 97 points, a four-point drop from the previous quarter and a more notable 18-point fall from 115 points one year ago. A reading of 100 indicates neutral sentiments.
Community banker sentiments about future business conditions dropped 27 points from the previous quarter and a remarkable 61 points below its reading from a year ago. Bankers remain remarkably pessimistic about regulations, as shown by the 28-point reading for regulatory burdens. Bankers were also pessimistic about business conditions, which received a reading of 83; monetary policy, 95; and profitability, 68. Readings in several other categories reveal much optimism, including capital expenditures,138; operations expenses,140; and franchise value,129.
“Community bankers are concerned about rising inflation and negative economic consequences from escalating geopolitical risks,” said CSBS Chief Economist Tom Siems. “Higher oil and gas prices and concern about regulatory burdens are adding to the apprehension.”