Banking

Introduction | Back to Outlook Conference Spotlight home | State of the District | National Banking Trends

Even as overall conditions are improving, banks will continue to face challenges, including low interest margins, rising regulatory compliance costs, and difficulty raising capital.

Those points were among the major ones made by a panel of senior executives who spoke at the Federal Reserve Bank of Atlanta's 2012 Banking Industry Outlook conference on March 1. Some of those challenges will be more problematic for smaller banks than larger banks, the executives said.

Greater premium on efficiency
Meanwhile, in the face of cost pressures, financial institutions will likely be compelled to operate more efficiently in the coming years. Banks will do this, in part, by deploying more self-service offerings for customers. That view was shared by panelists Laura Schulte, eastern region community banking president for Wells Fargo, the nation's fourth-largest banking company with $1.3 trillion in assets, and William Rogers, president and CEO of Atlanta-based SunTrust Banks Inc., which has $177 billion in assets.

The other two panelists were John Kanas, president and CEO of BankUnited Inc., an $11.3 billion asset banking company based in Miami Lakes, Fla., and Edwin Hortman, president and CEO of Ameris Bancorp of Moultrie, Ga., which has $3 billion in assets. The session was called "The Post Crisis Era in Banking: How Senior Executives Respond to the Current Banking Environment."

Banks to be more boring?
As more stringent capital requirements and other rules take hold, banks in general will become "more boring," less flashy, and more stable, Kanas said. If institutions indeed become more stable and thus less risky, they might face lower capital requirements, he remarked.

Kanas believes customers, bankers, and regulators will need to adjust to these "new" banks. In the coming year all banks, in the view of the panel participants, will likely face low interest rates and thus thin profit margins, along with higher compliance costs. But armed with far more resources and greater economies of scale, larger banks will have an easier time increasing efficiency than will their smaller counterparts, Schulte noted.

Hard to grow and raise capital
Schulte and others also remarked that in coming years smaller banks, especially, could find it difficult to grow very quickly. Consequently, community banks will not have a "growth story" that will attract capital investors, Hortman predicted.

Another particular challenge for smaller institutions will be higher regulatory compliance costs resulting from the Dodd-Frank Act, Hortman and Kanas said. At $3 billion in assets, Ameris fits the profile of a community bank. BankUnited is just above that threshold. Both predicted the costs of Dodd-Frank compliance would be significant for their banks.