|
 |
National Survey: Bankers Predict Increase in Loan Losses April 30, 2009 (SmartPros) In a new survey conducted by Grant Thornton, bankers see an increase in delinquencies, foreclosures and loan losses and cite core deposits as the principle means of funding bank growth in 2009. A majority of bankers anticipate an increase in the number of delinquencies (78%), the number of foreclosures (59%) and consumer (54%) and commercial loan losses (66%), according to Grant Thornton LLP's 16th Bank Executive Survey, conducted in conjunction with Bank Director magazine. Nearly half anticipate a decrease in demand for consumer loans (50%), residential mortgage loans (46%) and commercial loans (45%).
"These survey results point to the backlash against the lax underwriting standards that contributed to the credit crisis," says John Ziegelbauer, national managing partner of Grant Thornton LLP's Financial Institutions practice. "To avoid repeating history, financial institutions will have to strike the balance between practicing prudent lending and jump-starting the lending that will help spur economic recovery."
Bankers cite core deposits (94%) as the most frequently anticipated means of funding bank growth in 2009. Three-quarters of bankers (77%) anticipate using Federal Home Loan Bank advances to fund bank growth in 2009, which is a drop from those who actually used them in 2008 (85%). Only 5 percent issued common equity as a means to fund growth in 2008, and only 4 percent issued preferred stock. To fund growth for 2009, 18 percent anticipate issuing preferred stock, while 10 percent anticipate issuing common equity.
The majority of bankers agree that increases in FDIC deposit insurance premiums will have a significant effect on the level of their banks' operating expenses, which will have to be offset by cuts elsewhere (81%), their banks will maintain their current underwriting standards for the foreseeable future (77%), and that consumers have diminished confidence in the banking industry (75%). However, they disagree with the following items: Re-pricing of ARMs will have an adverse impact on their banks' loan losses in the coming year (81%), fair value accounting is the most appropriate method for banks to recognize the value of their financial assets held for sale or trading in earnings (60%), and the FDIC should insure all bank deposits (52%). To grow and/or compete profitably in the coming year, bankers plan to increase cross-selling efforts to current customers (80%) and conduct promotions to attract new customers to existing products and services (77%). Less than a quarter of bankers plan to expand their banks' market areas by building additional branches (20%), acquiring additional branches (22%) or selling or closing branches (13%).
"As evidenced by our respondents, many banks are going back to basics and refocusing on their existing service offerings," adds Ziegelbauer. "In this environment, banks cannot simply expand for the sake of growth. However, well-capitalized banks can seize the opportunities created by the downturn to buy competitors and expand market share." Just more than half of the bankers (51%) report that they are not familiar with IFRS, while 28 percent say that it is not yet a significant issue for their bank. Only two percent of bankers say that their banks are prepared to switch over to IFRS, and another two percent have sent someone to training to learn about IFRS.
"While U.S. adoption of IFRS may be inevitable, it may not be catastrophic for banking institutions," says Dorsey Baskin, partner in the National Professional Standards Group for Grant Thornton. "Given the existing extent of convergence between applicable U.S. standards and IFRS and the ongoing efforts of the FASB and IASB to converge standards that remain out of sync, the full adoption of IFRS many years in the future could turn out to be more of a whimper than a bang."
For a copy of the survey, please go to www.GrantThornton.com/BankSurvey or e-mail Grant Thornton's Financial Services practice at FinancialServices@gt.com. |
|
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
