Nearly all bank executives predicting recession

Nearly all executives expect a recession to strike within the next 18 months, according to a recent IntraFi study of bank executives from 388 U.S. banks. 

An even 48-percent split predicted the U.S. economy will either fall into a recession by the end of the year or do so in 2023. Only 4 percent didn’t predict a recession “in the near future.” Though 44 percent said overall economic conditions have remained the same over the past 12 months, 57 percent expect moderately worse conditions over the coming 12 months, an 11-point increase from April. The Bank Executive Business Outlook Survey, taken from June 21-30, included responses from presidents, CEOs, CFOs and chief operating officers. 

Those findings come as a significant number of top economists predict a recession. As reported by Reuters, Goldman Sachs predicted a 30-percent chance of a recession last month over the next year, up from 15 percent earlier, as decades-high inflationary pressures and the Russia-Ukraine war continue to harm the economy. 

 Many executives surveyed in the IntraFi report said the Federal Reserve will not properly respond to decades-high inflation readings. The Fed, which has raised interest rates by 1.5 percentage points since the beginning of the year, reportedly could consider another 50-75 basis point increase this month. Sixty-one percent said the Fed would raise interest rates too quickly and too high to account for inflation, while only 18 percent said they didn’t think the Fed would do so fast enough. Twenty-one percent said the Fed is on the right track to properly address inflation. More than half predicted a recession will begin because the Fed will overcorrect, with only 25 percent saying supply chain problems will push the nation into a downturn. 

Executives reported ongoing challenges in finding and retaining qualified staff. Sixty percent said they were having problems finding qualified employees for open positions. Two-thirds raised compensation to attract and retain qualified employees, and 31 percent said they had increased flexibility for work schedules and locations. Still, approximately 60 percent of bankers said remote workers are not a viable option, with only 21 percent saying they are. Fifteen percent said remote work is possible for mid-level or lower positions, with 5 percent saying the same for senior executive roles.

Other executives findings included:

  • More than 3-in-4 said their access to capital had not changed in the last 12 months. Sixty-seven percent don’t expect their access to change in the coming year. 
  • Forty-two percent said loan demand had increased moderately over the last 12 months. Twenty-six percent reported a moderate decrease. Forty-four percent predict a moderate decrease in loan demand in the coming 12 months, and 26 percent anticipate a moderate increase. 
  • Forty-three percent reported a moderate increase in funding costs with 31 percent citing no change. More than half say there will be a moderate increase in funding costs in the coming 12 months.  
  • Sixty percent said there had been no change in deposit competition over the previous 12 months with 30 percent reporting a moderate increase. Fifty-seven percent say there will be a moderate increase in deposit competition in the coming year.