Pandemic Continues to Create Significant Challenges for Banks
Anticipating the expiration of loan forbearance periods, banks are getting ready to increase reserves and restructure troubled debt
ARLINGTON, Va., Nov. 19, 2020 /PRNewswire/ -- Banks continue to grapple with the issues presented by the COVID-19 pandemic and many are preparing to increase reserves and restructure troubled debt, according to the third quarter survey of top executives at more than 500 banks conducted by IntraFi NetworkSM (formerly Promontory Interfinancial Network).
About two-thirds of bankers say that economic conditions have worsened over the past twelve months and just over a quarter think it will improve over the same period going forward. More than a third say they expect the economy will continue to decline over the next year.
"The survey shows the continuing struggles that many bankers face as a result of the pandemic," said Mark Jacobsen, CEO and Cofounder of IntraFi Network. "The majority are still downbeat about the state of the economy."
Bankers are readying steps for when loan forbearance periods related to COVID-19 expire. Slightly more than two-thirds expect to build reserves and a similar number predict a need for troubled debt restructurings. Only 11% project a need for increased capital. Finally, 37% say that credit reserve building as a result of the economic impact of COVID-19 would likely peak in the first half of 2021.
Ninety-eight percent indicate that monthly foot traffic at their branches has dropped in comparison to pre-COVID-19 levels, while 97% report increased visits to their mobile app. Despite the almost universal decline in branch traffic, only 7% indicate their institutions plan to reduce the number of branches following the pandemic.
Bankers are divided on when the Federal Reserve will change interest rate policy. While the Fed foresees keeping rates at their historic lows through 2023, 42% report that they believe the Fed will adjust rates before 2023. A similar percentage say they believe the Fed would keep rates at current levels through 2023.
The third quarter survey garnered responses from CEOs, presidents, and CFOs at 512 unique banks.
Other Highlights
- Funding Costs — More than nine in 10 bankers note their institution's funding costs had decreased during the previous 12 months, and 59% percent project their bank's funding costs to continue to fall in the 12 months ahead. Only 4% anticipate an increase — a 17-point drop from one year earlier.
- Deposit Competition — Fifty-three percent predict deposit competition would remain the same for the 12 months ahead.
- Loan Demand — The percentage of respondents that anticipate loan demand would improve in the next 12 months rose 10 points from the second quarter to 46%.
- Access to Capital — Seventy-six percent of bankers report that their bank's access to capital remained steady in the 12 months prior. Bankers don't expect the situation to change much over the 12 months ahead, with 75% of respondents predicting that their access to capital would remain the same.
To read the report in its entirety, please visit our new website.
About IntraFi Network
Chosen by thousands of banks since its founding (as Promontory Interfinancial Network) nearly two decades ago, IntraFi Network has assembled the nation's largest bank deposit network. Its solutions connect financial institutions of all sizes to help each build stronger relationships with its customers, fund more loans, seamlessly manage liquidity needs, and earn fee income. As the nation's #1 provider of reciprocal deposits and a leading provider of overnight and term funding options, IntraFi Network has the scale to be a strategic partner for even the largest bank's funding and capital management needs, or for the smallest.
SOURCE IntraFi Network
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