Less than one third of bankers believe their local economy will improve in the next six months, according to Grant Thornton’s annual Bank Executive Survey, conducted in conjunction with Bank Director. The results reflect a steep drop from the 44 percent of bankers who expected improvement in 2011. Also worrisome is that the number of bankers expecting their local economies to get worse more than doubled from 6 percent last year to 13 percent today.
Bankers also exhibited less optimism regarding the national economic outlook. The percentage of bankers expecting the U.S. economy to improve dropped by two-thirds, from 39 percent in 2011 to just 13 percent this year, while the percentage expecting the economy to worsen more than doubled from 9 percent in 2011 to nearly 20 percent in 2012.
“As global economic recovery has slowed to the point of stagnation, bank directors have become more cautious about forecasting local or national growth,” said Nichole Jordan, national banking and securities industry leader at Grant Thornton. “Recent numbers from indicators such as job growth and unemployment have been underwhelming, tempering last year’s expectations which formed during a period of more positive economic outlook.”
Bankers are also concerned that regulatory requirements have become overly burdensome. Regulatory compliance was the most cited (94 percent) ongoing issue bankers expect to face during the coming year, followed by downward pressure on margins due to low interest rates (88 percent), and weak loan demand (67 percent).
“The newly minted Consumer Financial Protection Bureau recently settled its first enforcement action for more than $200 million. For bankers, these new regulatory pressures, combined with fair lending issues and ongoing Department of Justice investigations, make a difficult economy that much more challenging,” said Molly Curl, bank regulatory national advisory partner at Grant Thornton.
Grant Thornton and Bank Director conducted this national online survey in June and July of bank CEOs, CFOs and audit committee members. Twenty-eight percent of the respondents were from small banks (those with less than $500 million in estimated assets at the end of 2011), while the remaining 72 percent were from large banks (those with more than $500 million in estimated assets at the end of 2009). Regarding ownership structure, 50 percent report that they are public institutions, 40 percent are private and 10 percent are mutuals.