Bank Executive Business Outlook Survey

2016, Q4

If there is one word that would sum up the findings from this edition of the Bank Executive Business Outlook Survey it would be “divergence.”

On the one hand, the transition to a new presidential administration and its potential impact on banking regulation and tax policy, alongside rising interest rates, are driving bankers to predict that 2017 is likely to be a very good year for banking.

Yet at the same time, bankers expect some fundamental challenges in the coming year. Promontory Interfinancial Network’s Banker Confidence IndexSM barely moved from before to after the election, remaining at 50.1, indicating some caution about underlying conditions ahead. (Charted on a scale of 1-100, a score over 50 can be viewed as expansionary, while a result below can be read as contractionary.)

There is a divergence between the belief that the overall environment for banking will get notably better and the expectation that fundamental indicators, like loan demand and funding costs, could show little change, or even worsen. This highlights the degree to which bankers believe that the new administration is likely to drive significant improvement for banks.

Is this optimism despite higher funding costs and still lackluster loan demand warranted? Keep reading and judge for yourself.

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