Political Environment and Weakened Expectations for Tax Reform and Reg Relief Could Be to Blame
Arlington, VA (June 15, 2017) – Following the transition to a new presidential administration last quarter, bank leaders were optimistic about the future of the banking industry. However, the results of this quarter’s Bank Executive Business Outlook Survey, conducted by Promontory Interfinancial Network, show bankers are much more guarded in their optimism.
Only 46% of respondents now believe that overall economic conditions will improve for their bank over the next 12 months, and 45% believe it will remain the same. This is a drop from the 62% of respondents to last quarter’s survey who expected overall economic conditions to improve over the course of 2017. Possible explanations behind bankers’ tempered optimism: the political environment in Washington and the sluggish pace of tax reform and regulatory relief legislation for the banking sector.
Mark Jacobsen, President & CEO of Promontory Interfinancial Network, noted, “The results of this quarter’s survey show that the overall sentiment of bankers is moving toward pre-election levels and is more in line with surveys prior to the 2016 election, when less than half expected overall economic conditions for their bank to improve in the coming year.”
While bankers’ feelings about overall economic conditions differed greatly this quarter compared to last, the Banker Confidence IndexSM remained consistent with past results. The Index, which is calculated using results of the survey and which tracks the sentiment of bank leaders based on four questions related to core banking factors (access to capital, loan demand, funding costs, and deposit competition), was 50.4 this quarter versus 50.1 in the fourth quarter, indicating banks are still slightly optimistic about the next 12 months. (Charted on a scale of 0-100, a score over 50 can be read as expansionary. A result below 50 can be read as contractionary.)
Along with the core tracking questions, this quarter’s survey also included supplemental questions on the future role of artificial intelligence (AI) in the banking sector. To be sure, movement toward using AI in the banking industry has been rather slow compared to other industries. However, survey results indicate that the pace of adoption may be quickening. Fifty-four percent of bank leaders expect to see AI systems become a familiar part of American banking in less than five years, and, of that number, about 10% think it will happen in two years or less.
For more information, please download the quarterly Bank Executive Business Outlook report.
About the Survey
The Bank Executive Business Outlook Survey was completed online over the course of two weeks from April 24-May 4, 2017, by CEOs, presidents, or CFOs of 166 banks. 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.
About Promontory Interfinancial Network, LLC
Promontory Interfinancial Network was founded by leading figures in the banking industry—Eugene Ludwig, Alan Blinder, Mark Jacobsen, and Alfred Moses—to provide financial institutions with profit-enhancing solutions. The founders envisioned a network, composed of thousands of financial institutions, whose “synthetic size” would help each member institution to compete more efficiently. More than 3,000 financial institutions have chosen to be a part of the company’s Network. Network members use Promontory Interfinancial Network’s balance sheet and liquidity management services to acquire and retain large-dollar customer relationships, purchase funding, manage liquidity, reduce collateralization costs, and buy and sell bank assets.
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