You could hear the excitement in bankers' voices as they discussed quarterly results over the past week.
At the inception of Donald Trump’s presidency, bank executives are almost giddy at the promise of lower taxes, lightened compliance burdens, more spending by consumers and businesses and other hopes prompted by the new administration. They have offered wish lists of regulatory reforms, predicted higher loan demand and salivated at the growth prospects for certain of retail financial products.
Granted, there have been cautionary words, about how legislative reforms are easier said than done, and how uncertainty about future tax rates and other policy matters could slow down business planning and certain kinds of development in the short run. But expectations of a friendlier business environment are high.
Here is an overview of just some of the predictions, good and bad, offered by bankers and others over the past two months and their recommendations for change. How many of these will come to be six months or a year from now? That will be the big theme of 2017.
How bankers think Trump's presidency will affect their business
Improved economic outlook
"Economic sentiment has clearly become more positive since the U.S. election. In general, we'll benefit from pro-growth policies, as will our clients. In addition, we see a path to more consistent interest-rate increases and revenue opportunities in areas such as infrastructure investment." — Michael Corbat, Citigroup CEO
Lower taxes considerably at certain banks
Smaller regional banks — such as the $43 billion-asset Silicon Valley Bank or the $21 billion-asset PacWest — could see the biggest upside to earnings. That is because they currently pay high effective rates, and have fewer strategies in place to lower their total tax bill. Bigger banks, however, could find themselves in a bind.
Promote capital spending, loan demand
“Individual companies are already requesting loans to buy trucks, to expand their plant, expand inventory.” — Kelly King, BB&T chairman and CEO
Complicate tax planning for commercial customers
Tax reforms “get harder when you get down to the brass tacks. They're never easy." — Brian Moynihan, Bank of America chairman and CEO
Increase consumer confidence
The incoming Trump administration "without question" will be a boon to the bread-and-butter business of retail banking. — Richard Davis, U.S. Bancorp chairman and CEO
Slow down affordable housing projects, which rely on tax credits
Uncertainty created by plans for tax reform "immediately slowed things down. We're hearing about that from our clients and from the market." — Rob Likes, national manager for community development at KeyBank
Improve working relationship between business and government
“It's not just the regulations, it's the degree of intensity with which the regulators apply those regulations.” — BB&T's King
Banks' policy recommendations
End tax exemption for large credit unions
“Credit unions that act like banks should be taxed like banks. .. The tax exemption should be left for the ‘Mom and Pop’ credit unions that remain true to the original charters.” — Alejandro M. Sanchez, president and CEO of the Florida Bankers Association
Make life easier for small businesses
“Some of the changes that would encourage small businesses to invest and potentially borrow more would be: a more streamlined SBA loan process; more flexibility with regard to the Affordable Care Act provisions for small business with 50+ employees; tax reform for small-business owners; and a revision of Dodd Frank Act Section 1071, a measure that requires lenders to gather information about applicants for commercial loans.” — Todd Hollander, head of business banking MUFG Union Bank
Change the CFPB’s punitive approach
“I’ve pleaded with Richard Cordray to consider making the CFPB an endorsement agency, not an enforcement agency – and I’m not being clever here.” — U.S. Bancorp's Davis
Make SIFI reform a stand-alone bill
“If they just tried to move the number [to cut off at $125 billion] to allow more competition in the marketplace, then they could deal with the rest of [regulatory reform] later. — Joseph DePaolo, Signature Bank CEO
Broad regulatory relief
Speaking at an industry conference in December, CEOs from several big banks outlined a host of requests for President-elect Donald Trump and Republican leaders in Congress. Chief among them: focus on corporate tax reform, scale back the Volcker Rule and push the Federal Housing Administration to update its lending policies and consider rolling back the liquidity coverage ratio.
Banks' strategic adjustments
Reinvest in service delivery
"Four dollars out of every 10 we make goes back to the government. You reduce that that to three out of 10 or two and one-half out of 10, and you know what I'm going to do with that money? I'm either going to build a new branch and hire seven people to run it, or pay a dividend to the shareholders, and they'll spend it on something like a new house, new car or new furniture." — McCall Wilson, president and CEO of Bank of Fayette County in Piperton, Tenn.
Expand banks’ health savings account business
If the Affordable Care Act is reformed, “it’s possible that eligibility for HSAs could expand by multiples of previous expectations…and contribution limits could potentially double. Hundreds of millions of Americans may ultimately qualify for HSA plans versus the 18 million who had them as of midyear 2016.” — James Smith, Webster Financial chairman and CEO