Bank Executive Business Outlook Survey

2017, Q4

Across a number of survey indicators, bankers’ views about the current state of the industry, as well as their expectations about its future, are pointing up.

In general, respondents showed growing enthusiasm for the economy with 63% saying economic conditions had improved for their bank today compared to 12 months ago and only 5% saying things had gotten worse. By contrast, those numbers were 49% “improved” and 9% “worse” on the same question asked last quarter—an 18-point gain in net favorability on that measure. Looking to the future, this survey shows bankers are even more optimistic about how the economy will impact their bank with 65% saying their situation will improve and only 5% saying it will get worse. Those numbers were 45% “improved” and 10% “worse” last quarter—a significant 25-percentage-point swing in net expectations.

The change in outlook could be explained by a number of factors: 1) the enactment of tax cut legislation (the survey was conducted after the bill passed into law), 2) a year of generally positive economic numbers, or 3) better underlying numbers for the banking sector. Most likely it is a combination of these and other factors.

We also asked bankers to whom they gave credit for 2017’s positive economic performance—the former or the current White House administration—and how much credit they ascribe to that administration. Forty percent of respondents gave “a lot of credit” to the Trump administration compared to only 5% to the Obama administration. This shows considerable approval for President Trump’s current economic policy among bank executives.

Respondents were also asked how they plan to use the money saved from the tax cut. A majority of community bank executives (51%) said they’ll use money saved to invest in their business and grow the company. The second most popular option (40%) was to increase wages for employees, perhaps a sign of greater pressure to retain worker talent at community banks.

We also asked banks which regulatory change would make the biggest positive impact for their bank. A whopping twothirds (67%) of community banks said they wanted a regulatory approach based on the size and complexity of the institution being regulated.

Highlights from other parts of the survey include:

  • Loan Demand. Slightly more than 58% of bankers reported an increase in loan demand this quarter—up a sizable 7.5 percentage points from last quarter. Sixty-four percent of respondents said they expect to see an increase in loan demand over the next 12 months, compared to 51% last quarter.
  • Funding Costs. The number of banks reporting higher funding costs escalated significantly this quarter as 78% reported an increase, compared to 68% last quarter.
  • Deposit Competition. The number of respondents expecting competition for deposits to increase over the next year rose slightly this quarter to 80%, compared to 77% in Q3.

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Bank Executive Business Outlook Survey

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