Survey says: Expect delinquencies, commercial loan losses and foreclosures to rise MortgagePress.comcredit issues, appraisals, healthcare costs
Almost half of banking executives (49 percent) are concerned
that recent credit issues will have an adverse impact on their
bank, according to Grant
Thornton LLP's 15th Bank Executive Survey. Reflecting this
concern, less than half (46 percent) of bankers participating in
the survey have confidence in the appraisals supporting loans
underwritten by their bank, and just 22 percent expressed
confidence in the appraisals supporting loans the bank
purchases.
"The lack of confidence expressed for the business of banking
goes hand in hand with an overall pessimistic view of the economy
expressed by more than half (56 percent) of survey respondents,"
said John Ziegelbauer, managing partner of Grant Thornton LLP's
financial institutions practice. "At the same time, only one out of
10 bankers is optimistic about the economy. This is the highest
level of pessimism and lowest level of optimism for the economy in
the last five years."
Credit concerns
Despite the concern among bankers that the credit issues could have
an adverse impact on their bank, the majority of responding
executives (62 percent) believe they have no exposure to the recent
credit crisis in the form of sub-prime loans, Alt-A loans or
investments backed by those loan products. Thirty-five percent
believe they have an exposure of less than five percent. In
response to credit issues, nearly half (45 percent) of responding
banks have already tightened their underwriting standards in 2007,
and another third (33 percent) said they plan to do so in
2008.
Bankers identified specific credit indicators to watch over the
coming year, including an increase in the number of delinquencies,
which 53 percent anticipate in 2008. At the same time, 41 percent
of bank executives believe foreclosures and commercial loan losses
will rise in 2008, while 27 percent expect an increase in consumer
loan losses and 28 percent anticipate residential mortgage loan
losses—an increase of 11 percent from 2007.
Hiring and healthcare costs
"Banking executives are illustrating a more conservative management
tone," said Ziegelbauer "The number of executives reporting staff
increases has declined from 2007, with 36 percent of the survey
population reporting planned increases, a decline from 63 percent
reported last year. At the same time, half (50 percent) of
respondents anticipate stagnant growth, an increase from 28 percent
last year."
Over half of respondents (56 percent) anticipate their health
benefit expenditures to increase, a number that is down by 23
percent from 2007.
Technology expenditures are key
Of those surveyed, 89 percent strongly agree that enhancing
technology to improve productivity is important to their bank's
success. Accordingly, 66 percent of bank executives—a higher
percentage than any other category—expect technology
expenditures to increase in 2008.
Fierce competition
Year after year, the survey results show nearly all executives
reporting their most formidable competitors are each other.
Overall, 76 percent of bankers polled ranked competition from
community banks as their highest concern.
Garnering the second highest percentage of responses were credit
unions, with nearly two-thirds (65 percent) of those surveyed
expressing concern about the number of retail customers their bank
is losing to credit unions, while 41 percent are worried about
losing commercial customers.
For more information, visit www.grantthornton.com.
