Bank Executive Business Outlook Survey
Bankers continue to remain glum about the future of the U.S. economy, although the level of concern may be bottoming out and showing early signs of a shift in direction.
According to the Q1 2019 Promontory Interfinancial Network Bank Executive Business Outlook Survey, almost half of respondents (48%) believe economic conditions will be the same 12 months from now, but only 17% expect conditions to improve—a five-point drop from last quarter and a 38-point drop from Q1 of last year.
At the same time, Promontory Interfinancial Network’s proprietary Bank Experience IndexSM showed an uptick to 43.3 (almost a 1 point increase).1 With regard to the forward-looking Bank Confidence IndexSM, survey results showed a 3.3-point increase to 46.3, the first uptick in 5 quarters and the largest positive change to the Confidence Index since the survey began.1 Despite these increases, both indices have stayed below the 50-point watermark for five consecutive quarters.
Fifty percent of bank leaders indicated commercial real estate is the loan category that would represent the biggest credit risk for their bank should the economy slide into a downturn later this year.
Highlights from other parts of the survey include:
- Funding Costs. More than 9 in 10 bank leaders (92%) said funding costs had risen in the last 12 months with 33% seeing a significant increase and 59% seeing a moderate increase. While a majority (58%) expect funding costs to rise over the next 12 months, this represents a 30-point drop from the last quarter and a 34-point drop from Q1 2018.
- Deposit Competition. While most banks continued to experience and foresee tougher deposit competition, the number of those with that outlook has dropped. Seventy-two percent of respondents reported that they believe deposit competition will increase over the next 12 months down from 83% the last quarter.
- Loan Demand. Banker enthusiasm about the future of loan demand continued to decline. The number of bankers who stated that they believe loan demand will grow dropped to 36% from 39% last quarter (and from 64% in Q4 2017). This was the fifth decline in a row.
- Access to Capital. One in four respondents projected that access to capital will improve over the next 12 months.
 The Bank Confidence Index is meant to quantify bankers’ forward-looking expectations for the industry over the next 12 months, while the Bank Experience Index is meant to quantify bankers’ experiences over the last 12 months. These indices are calculated from responses to survey questions relating to four key factors: access to capital, loan demand, funding costs, and deposit competition.
Learn more about the Bank Executive Business Outlook Survey.