Bankers see their businesses heating up — with expectations reaching new heights on overall economic conditions, according to Promontory Interfinancial Network’s Bank Executive Business Outlook Survey Report. Respondents’ answers to quarterly Bank Executive Business Outlook Surveys from 2017 shed light on bankers’ experiences over the past year and on what’s to come in 2018.
“The expected increase in business by banks indicates not only that bankers believe good things are in store for them, but also that they think the economy overall is headed in a positive direction,” said Mark Jacobsen, president and CEO of Promontory Interfinancial Network. “Combined with tax reform in late 2017 and consecutive jobs reports that have exceeded economists’ expectations in 2018, the optimism seems justified.”
The Bank Confidence Index, which is calculated by measuring bankers’ expectations for access to capital, loan demand, funding costs and deposit competition during the next 12 months, ended 2017 at 50.5. This is a marked increase from Q2-2017 (47.6) and Q3-2017 (48.1), indicating bankers have become more optimistic about the future. Charted on a scale of 0-100, a score higher than 50 can be read as expansionary – meaning overall projections have crossed from contractionary to expansionary territory.
Access to capital is expected to be strong this year. At year-end, more than 37 percent of respondents said their outlook had improved.
Expectations for loan demand were near an all-time high, with 64 percent foreseeing an increase — a nearly seven-point increase from Q1-2017.
Overall economic conditions are expected to improve during the next 12 months, according to nearly 65 percent of respondents. This represents an 18-point increase from the start of 2017.
Two areas where bankers show less optimism are deposit competition and funding costs. Eighty percent of respondents expect deposit competition to increase this year — a 15-point increase since the beginning of 2017. Nearly 89 percent of bankers foresee higher funding costs in 2018.