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The long way home

Posted November 5, 2009 |  By Steve Bills

BOSTON — Aside from the nose-bleed bonuses from the likes of Goldman Sachs, most of the banking industry should expect a long, slow return to anything like normal times.

In fact, it is likely to be 2013 before the industry's profitability returns to the level of 2006, the last year before the Great Recession, says Richard K. Davis, the chairman, president and chief executive of U.S. Bancorp.

And despite all the tough talk in Washington, D.C., about reforming the industry, banking in 2019 will look a lot like it does today, Davis said during a "CEO Roundtable" session at the Bank Administration Institute's Retail Delivery conference here on Wednesday.

"I'm worried about the next 10 days and the next 10 weeks more than I am about the next 10 years," Davis said, with one eye on the regulatory environment and the other on the economy, which could yet plunge anew.

In fact, he pointed to excessive caution in the business sector as a risk to economic recovery.

"They've got unused lines of credit, they've got preferred pricing, and they're still not only not using it, they're paying it down," Davis said.

That will limit banks' ability to help drive growth through lending, he said. "We're not going to lead the recovery. We're going to follow it in a way we've never really seen before."

Bharat Maranai, the president and chief executive of TD Bank, speaking on the same panel, predicted a turn away from the go-go financial engineering of the past decade and a return to more traditional banking practices.

"Banking for the most part is going to go back to being a bit boring," he said. "There's nothing wrong with that."

The conference itself, with an emphasis on the post-crisis environment, was itself something of a victim of the slump. One unidentified speaker said between conference sessions that he heard the attendance was about 1,500 bankers at Retail Delivery this year, a pale shadow of the 4,000 to 6,000 who turned out in more robust years. He asked not to be named because he had been given the number in confidence and was not authorized to disclose it.

At least no protesters greeted the conference attendees, in contrast to the hundreds who turned out in Chicago in October for the annual meeting of the American Bankers Association.

Perhaps it was a sign of the straitened sensibilities of the industry that this fall's signature meetings took place at serious Northern Tier business destinations, rather than the playgrounds of Las Vegas and Orlando, the customary venues for such confabs in flusher times.

| Comments

Comments:
Getting back to basics and a more conservative approach would do US banks good. Looking around at our clients, the ones who stayed away from the exotic instruments free-for-all did much better (though they still took a hit).

Getting back to improving efficiency and productivity will be a less risky way to improve profitability in the near term. We have seen much more interest in the last three month for Posted by DBasri on November 06, 2009 at 02:06 PM EDT #


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Written by the journalists at American Banker, as well as the occasional guest, BankThink is about ideas, trends, and other developments in financial services.