Is the party over? In the years since the Great Recession, financial institution executives became increasingly optimistic. In Cornerstone Advisors’ annual What’s Going On In Banking study, CEO optimism hit a five-year high in 2017 and, for the most part, stayed that way for 2018. Looking ahead to 2019, however, many bank and credit union execs are singing a different tune.
“The Trump bump is turning into the Trump slump,” according to my colleague Ron Shevlin, research director at Cornerstone Advisors and author of What’s Going On In Banking 2019: Is The Party Over? In the latest study results, bank executives that claimed to be somewhat or very optimistic about the coming year dropped 16 percentage points from the prior year, and credit union execs who expressed optimism about the future tumbled by nearly 30 percentage points.
Robert Bradley, chief risk officer at $1.3 billion Bank of Tennessee in Kingsport, Tenn., was one of many institutions surveyed for What’s Going On In Banking who expressed pessimism about 2019. “The expansion cycle is nearing its end,” Bradley said. “The slowing housing sector and rising rates could slow loan demand, and the good economy that made many projects look attractive may prove somewhat illusory.”
In a recent Duke University survey, 82% of surveyed CFOs predicted another recession by the end of 2019 or early 2020. As we look ahead to a year forecast to be less than bright, can the FIs whose executives gave themselves improved ratings for IT future-readiness in What’s Going On In Banking 2019 sustain a recession?
Even CIOs who are optimistic about 2019 need to take precautions with their technology. Regardless of whether the party is over, financial institutions can use these four GonzoBanker strategies to help protect their tech initiatives.
Everyone makes money in a growth cycle, but smart investors and smart bankers build long-term wealth in downturns by bargain hunting—whether that’s buying depressed real estate, failing banks or rock-bottom-priced technology. And opportunistic institutions will stretch/conserve non-strategic and discretionary operating and capital spending to be ready to take advantage of deals when vendors get hungry in a downturn.
Business continuity planning usually focuses on disasters, and there is no more widespread disaster than a global economic downturn. Thorough planning in advance of the event, without the stresses of living in the midst of the event, is crucial. While we all want to hope for the best, planning for the worst is the best defense against a slump.