Banks Widely Express Optimism About Lending Conditions
and Expect Increased Competition for Deposits in 2015
Promontory Survey Shares Senior Bank Executives’ Outlook on Critical Lending
and Funding Topics
ARLINGTON, VA (May 7, 2015) – After a year in which many banks began to feel a pickup in the economy, bankers are entering 2015 with a sense of optimism about the next 12 months. Nearly three quarters of survey respondents expect an increase in loan demand, according to the inaugural edition of the Bank Executive Business Outlook Survey from Promontory Interfinancial Network, LLC (Promontory).
“In our work with bank leaders, we receive regular input about the issues that are at the top of their minds,” said Mark Jacobsen, President and CEO at Promontory. “We launched the survey to codify and share the concerns expressed by bank executives across the country.”
Promontory expects to conduct the survey with bank leaders (CEOs, presidents, and CFOs) on a quarterly basis, with the intention of providing deeper insights into how the perspectives of bank leaders shift with changing economic conditions.
Key findings from the survey:
- Seventy-five percent of respondents expect an increase in loan demand in the coming 12 months, higher than the 69% that reported seeing an increase in loan demand compared to the prior 12 months.
- Two-thirds of banks expect funding costs to rise in the next year, although the vast majority expect the increase to be moderate.
- To mitigate the expected increase in funding costs, 42% of respondents indicated that they plan to raise loan pricing to outpace deposit rates once costs begin to rise, while approximately one in four (24%) said they may alter deposit structures, for example, by pushing for longer-term deposits.
- Approximately 65% of survey respondents expect competition for deposits to increase over the next 12 months, and they believe that larger banks will be driving the competition.
- Banks ranked growing relationships with current depositors as preferable to gathering new customers as a source to meet their funding needs.
For access to the Bank Executive Business Outlook Survey report, please visit Promnetwork.com/home/news/business-outlook-survey.
About the Survey
The survey was completed online in March 2015 by 278 senior bank leaders in the positions of CEO, president, or CFO—people with a top-level perspective of their balance sheet and a pulse on bank strategy. Responses were statistically representative of the overall banking industry by asset size, according to the Chi-Square Goodness of Fit test.
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. Today, Promontory’s Network of participating institutions includes approximately 3,000 members nationwide. These members use Promontory's services to acquire and retain large-dollar customer relationships, purchase funding, manage liquidity, reduce collateralization costs, and buy and sell bank assets.
Senior Vice President,
Promontory Interfinancial Network, LLC