It’s been over a year since Todd Gerber was promoted to WaFd Bank regional president for Arizona, and since acquiring his new position, he — like many other business leaders — has had to contend with a number of ups, downs and all-around roller coaster of issues in 2023. From the colossal failures of Silicon Valley Bank and First Republic Bank to varying cybersecurity threats and ongoing inflation-related challenges, Gerber and his colleagues trudged through several challenges. But even amidst significant obstacles, there were several wins to recognize — some of which will likely carry positive momentum into 2024. Az Business Leaders talks with Gerber about what to expect in the financial services sector and Arizona’s banking industry outlook for 2024 and beyond.
AZ BUSINESS LEADERS: Todd Gerber, WaFd Bank
Az Business Leaders: What trends do you forecast in banking for 2024?
Todd Gerber: Banks will continue to be cautious in their lending. I don’t foresee that changing much in 2024, especially in certain business segments. Construction financing is one of those segments that they’ll continue to be more cautious in. Second, banks will continue to compete heavily for deposits. Every bank wants to grow deposits on their balance sheet, and they’re also competing with treasuries. Right now, treasuries are yielding historically high, or at least highs for the last five or six years. So those trends will continue.
ABL: How about banking trends for Arizona in particular?
TG: For specific trends in Arizona, I’m actually quite optimistic. Arizona will have its challenges as it does, but I think the state will continue to benefit from net migration, specifically from California. There will continue to be people moving here from California. They will possibly have challenges finding new homes because there’s a tight supply of homes. But I think we’ll continue to benefit from net migration, and that’s because we continue to grow good jobs and our housing is still more reasonable than the coasts.
I also think our economy is going to continue to become more and more diversified and the job opportunities — specifically in the semiconductor space and related industries that support the semiconductor space — will continue to grow, and these are good quality, high-paying jobs.
ABL: What are some of the more prominent, current challenges in banking?
TG: This is interesting; the continued costs and challenges with the ever-increasing regulation regarding BSA bank secrecy, the ‘know your customer’ and maintaining compliance in general, and staying in compliance because regulators are continuing to increase their focus on this — none of this is going away anytime soon. And that presents challenges to banks.
ABL: Can you share some of the victories the banking industry experienced in 2023?
TG: I think one of the biggest positive wins for banking in 2023 was the stabilization of the banking industry after the failures of Silicon Valley Bank and First Republic Bank. Those shook the market and depositors and customers for a period of time, and that seems to have stabilized. And, customers appear to have maintained their confidence in banking and the banking system in general.
I believe that if we avoid a recession and further material weakening of the economy, banks should weather 2024 pretty well. Most banks have strengthened their balance sheets and provision for loan losses over the past couple of years and are fairly well positioned to weather the storm — as long as the storm isn’t too deep or too long.
ABL: How will inflation impact banking in 2024?
TG: Hopefully inflation will subside, and by mid to end of the year, we will start to see some interest rate decreases. I don’t know if I’d say [rates will decline] significantly, but hopefully, we can cut inflation or make material improvements to it. I don’t want to say inflation will be under control, but if we’re making good progress on lowering inflation, I think we could see some interest rate cuts.
ABL: How are cybersecurity, data breaches and similar threats impacting the banking industry?
TG:Cybersecurity threats are constant and they’re increasing in sophistication every day. Banks have to constantly be on the lookout for not only cybersecurity threats but also threats to our customers. The threats can be directly against any one bank or they’re continuously against our customers and their accounts, and so we’re constantly increasing our technology to try and manage that. We’re always informing our clients of services when they become available that will help protect them, and informing them of the latest scams. They seem to change very quickly.
ABL: What aspects of banking are you most looking forward to in the new year?
TG: I am looking forward to inflation decreasing, especially in a couple of areas: in housing, rents, energy, gasoline prices and electricity prices, but specifically gasoline prices and then food costs. Those areas of inflation are really hurting the average consumer because they aren’t discretionary. You can cut back on certain things and services, but housing, energy and food are must-haves. If inflation decreases, those will be some of the best things that come out in 2024 for all of us.
