The year in preview: Banking

What life will be like in Idaho’s banking industry in 2019 depends a lot on what the national and global economies do. December saw the stock market edging into bear territory, the bond market teasing the inverted yield curve typically presaging a recession, and the Federal Reserve Bank raising interest rates, which slows down lending.

Idaho and the nation have enjoyed one of the longest bull markets in history, but there have been signs that the party is coming to an end. That said, enough fundamentals remain strong that it may take a while unless something untoward happens.

“In 2019, I anticipate that Idaho’s economy and population will continue to grow nicely,” said Brian Berrett, chief financial officer for Idaho Central Credit Union. “I anticipate that the rate increases we’ve been experiencing over the last year or two will slow down. However, there could be a slowdown in lending due to any new increases on top of the ones we’ve already had.”

Robert Spendlove, senior vice president and economic and public policy officer for Zions Bank predicted that 2019 will be “characterized by uncertainty because of the inverted yield curve,” where long-term bonds have lower rates than short-term ones.

“Due to increases in interest rates, there has been some pullback on lending, particularly in the refinance market,” he said. “People refinance because they can get a better interest rate, but with interest rates increasing, offerings are going away.”

The economic situation – whatever it is – will also affect credit unions, said Lynn Heider, vice president of public relations for the Northwest Credit Union Association, which represents Idaho credit unions.

“The Fed is expected to continue to incrementally increase interest rates,” she said. “It is even more prudent for consumers to consider credit unions in this environment because they will find more competitive interest rates on their loans, credit cards and savings accounts.”

Financial institutions are using data – in quantities so large that it is known as “big data” – more to help improve their business, said Bipin Sahni, head of innovation research and development for Wells Fargo.

“Data is the next gold rush,” he said. “While there has been movement across the industry, there are still breakthroughs to be made in surfacing and acting on meaningful insights. Organizations will be looking to use data to bring new value to customers and team members.”

Big data is also likely to be a focus of Congress after 2018’s Economic Growth, Regulatory Relief and Consumer Protection Act.

“If I am again chosen to lead the Banking Committee, I expect our focus will largely be on ‘Big Data’ and privacy issues, and whether we can give people the tools they need to protect their privacy and opt out of data collection, and I believe we can find consensus in this area with our House counterparts,” said Sen. Mike Crapo, R-Idaho. “Both chambers have also shown bipartisan support for legislation that will help to facilitate capital formation. There are also multiple expiring programs and charters that will need to be reauthorized, like the National Flood Insurance Program, the Terrorism Risk Insurance Act, and the Export-Import Bank. Last, I do expect us to address housing finance reform in some fashion, as it is the last piece of unfinished business from the financial crisis.”

And until we know for sure, there’s nothing wrong with preparing for a recession, Spendlove said, joking that economists have predicted nine of the last five recessions.

“When is it going to happen, how bad is it going to be, and what will cause it? You can’t tell,” he said. “If you have an emergency fund of three to six months’ of expenses – even though it’s really tough to lose your job or have your business go bankrupt – you can fall back on that. What’s the worst-case scenario if you don’t? You have a lot of money and no debt.”