Chief executive officers at mid-size banks and credit unions are decreasingly optimistic about the year ahead, according to What’s Going On In Banking 2019: Is The Party Over?, a new report from Cornerstone Advisors. Cornerstone Advisors surveyed 305 senior executives from community-based banks and credit unions to learn their priorities, fintech plans and state of future-readiness for the year ahead. A number of key study findings left experts at Cornerstone wondering: Is the party over? “The Trump bump is turning into the Trump slump,” says Ron Shevlin, research director at Cornerstone Advisors and author of the 2019 report, the sixth in a series. Bank executives that are somewhat or very optimistic about the coming year dropped 16 percentage points in the latest survey after a 7 point drop the previous year. Credit union execs who are optimistic about the new year tumbled by nearly 30 percentage points. Slowing loan growth, higher funding costs and concerns of early credit softening translated to some of the most fragile forward earnings projections in years, observes Steve Williams, Cornerstone Advisors president and co-founder. “The growing industry volatility is showing in the diminishing confidence banks and credit unions have in hitting earnings growth targets for 2019.” Among key study conclusions: • 50% of execs cite growing deposits as their #1 concern for 2019. Deposit displacement, or the diversion of funds from checking to alternative accounts, will make deposit retention even more difficult in the year ahead. • Expanding digital presence is a priority for a growing number of FIs. Unfortunately, it seems to be coming at the expense of better marketing and sales capabilities. • Bank and CU execs give themselves improved ratings for future-readiness in 2019. But when artificial intelligence, machine learning and robotics process automation are not on the radar for a third to half of bank and credit union leaders, many execs may be deceiving themselves. Half of banks and credit unions say fintech partnerships will be important in 2019, with digital account opening topping the functional list. “Where will these institutions get the skills to vet and negotiate with potential partners?” asks Cornerstone Advisors Partner Terence Roche. “If FIs’ view of digital account opening doesn’t include a hefty focus on digital marketing, contextual product offerings, data-driven campaigns and a very tight, easy fulfillment process, then it won’t matter what investment they make. It won’t work.” “2019 is shaping up to be a challenging year for the banking industry,” Shevlin concludes in the report. Regulatory challenges never materialized, the downward trend in the stock market is causing concern, and few mid-size FIs have the resources and skills to enter into more than one or two fintech partnerships. “I hope to tell you that I was wrong in next year’s What’s Going On In Banking 2020 report.” The research in What’s Going On In Banking 2019: Is The Party Over? stems from a combination of survey results and the analysis of hundreds of community bank and credit union consulting engagements performed by Cornerstone Advisors. |
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