Is a U.S. Recession Coming? Survey of Bank Executives Finds Majority See Next Recession Starting in 2020 or Later.

ARLINGTON, Va., Feb. 25, 2019 /PRNewswire/ -- The latest Promontory Interfinancial Network Bank Executive Business Outlook Survey of CEOs, presidents, and CFOs from 447 unique banks across the country revealed that bankers hold some surprising views about the economy, corporate debt levels, and concerns for the future:

• Seventy-one percent of respondents believe that the next U.S. recession won't begin until 2020 at the earliest, although 25% believe it might start as early as the second half of 2019.
• Less than one-third of respondents (32%) say that the current level of corporate debt is bad for their business, while 41% say the debt level has no impact and 27% say the current debt level is actually good for their business.
• Bankers were far less concerned by the risk of competition from large banks and fintechs than they were about cybersecurity hacks and an economic slowdown. Thirty percent of those surveyed assigned cybersecurity hacks a 5 on a scale of 0-5 (with 0 representing no concern at all, 1 representing the lowest-level of concern, and 5 representing the highest). By contrast, only 6% assigned a 5 to competition from the nation's largest banks.

The survey showed some regional differences. Twenty-eight percent of respondents in the Northeast—more than any other region—predicted the next recession would come sometime after 2020. Only 17% of those in the Midwest and 19% in the West made that prediction. Respondents from larger community banks (banks with between $1 and $10 billion in assets) were slightly more optimistic about a recession holding off until 2020 or later (80%) than their counterparts at smaller community banks (banks with less than $1 billion in assets) (70%).

"In spite of a strong U.S. economy, a corporate tax cut that helped banks earn record profits in the second and third quarters of 2018, and enactment of regulatory relief legislation, bankers have become increasingly pessimistic about the future," said Mark Jacobsen, Cofounder & CEO of Promontory Interfinancial Network.

Banker views on how overall economic conditions affected their businesses in the previous 12 months—and how they might impact their businesses in the next 12 months—were more negative than last quarter. The number of those saying conditions had improved over the past year dropped by 29 percentage points, while the number of those expecting conditions to improve in the coming year dropped by 21 percentage points.

On the metrics that make up Promontory Interfinancial Network's proprietary Bank Experience Index^SM (access to capital, loan demand, funding costs, and deposit competition now compared to 12 months ago), the survey results showed a 3.7-point drop to 42.5 from Q3 to Q4 2018. This was the fourth consecutive quarter that it fell below the 50-point mark and the lowest level recorded since the survey's inception. According to the forward-looking Bank Confidence Index^SM (access to capital, loan demand, funding costs, and deposit competition expectations for 12 months from now), survey results showed a half-point drop to 43.0 from Q3 to Q4—also to the lowest level recorded. (Charted on a scale of 0-100, a score of 50 represents the baseline expectation.) 

Community banks in the South saw a decrease (21 percentage points) in improved access to capital. And larger community banks reported a drop (27 percentage points) in bankers reporting stronger loan demand.

There were also variations on expectations for the future by region. Among community banks in the Midwest, survey results showed an eight-percentage-point drop since Q3 in projections for rising loan demand. The results also showed a 12-percentage-point drop from Q3 in the number of banks in the West foreseeing an increase in loan demand.

For details and other insights, please download the latest survey report.

About the Survey
The Q4 2018 Bank Executive Business Outlook Survey was completed online over the course of two weeks from January 3 to January 16, 2019, and incorporated responses from 447 unique banks as provided by CEOs, presidents, and CFOs from across the country. Compared to the asset-size distribution of the banking industry, responses were slightly weighted toward banks with less than $1 billion in assets. The survey is the sixteenth quarterly survey published by Promontory Interfinancial Network.

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 the largest bank network of its kind, 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 solutions to acquire and retain large-dollar customer relationships, purchase funding, reduce collateralization costs, and buy and sell bank assets.

SOURCE Promontory Interfinancial Network