A composite outlook of bank CEOs, presidents, and CFOs from across the United States suggests increasing optimism about the banking industry and overall economic conditions. The Bank Confidence Index, which is calculated using the results of Promontory Interfinancial Network’s Bank Executive Business Outlook Survey, tracks banker expectations in four key areas: access to capital, loan demand, funding costs, and deposit competition.
According to survey analysis, overall banker confidence was up in the first quarter 2017, slipped in the middle of the year, but rebounded. The fourth quarter 2017 results show a rising optimism in all four regions of the country. The rise is especially pronounced in the northeast.
In general, the company stated, respondents showed growing enthusiasm for the economy, with 63 percent saying economic conditions had improved for their bank today compared to 12 months ago while only 5 percent said things had gotten worse. By contrast, those numbers were 49 percent improved and 9 percent worse in the third quarter of 2017. That equals an 18-point gain in net favorability on that measure. Looking to the future, the survey showed bankers were even more optimistic about how the economy might impact their banks. Sixty-five percent said they expected their situation to improve while 5 percent said they expected their situation to worsen.
“Bankers are feeling more positive about the future than they have in the last 18 months,” said Mark Jacobsen, president and CEO of Promontory Interfinancial Network. “This optimism is good for the industry and for the economy.”
Jacobsen said banker optimism could counter the impact of higher interest rates.
Promontory Interfinancial Network conducts its Bank Executive Business Outlook Survey every quarter.
The fourth quarter 2017 survey also examined how bankers planned to use the money saved from the enactment of the recent tax reform legislation. A slim majority of bank executives, 51 percent, said they intended to use the money to invest in their businesses, while 40 percent said they would increase wages for employees (ahead of paying higher dividends and/or buying back stock).
Executives were also asked which regulatory change would make the biggest positive impact for their bank. Two-thirds, or 67 percent, said they wanted a regulatory approach based on the size and complexity of firms being regulated.
The fourth quarter 2017 Bank Executive Business Outlook Survey was completed online over a two week period in January and incorporates responses from 370 unique banks as provided by C-level bank executives, defined as CEOs, presidents, and CFOs, from across the country. Compared to the asset-size distribution of the banking industry, responses were slightly weighted toward banks with between $1 billion and $10 billion in assets.