Road Warrior

Bankers’ Views: Part 2

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In the last column, discussion centered on bankers’ views on interest rates based upon seniors enrolled in the 64th annual session of the Graduate School of Banking at LSU. The consensus was that low interest rates and an accommodative Federal Reserve in the U.S. would remain until late 2014 and into 2015. Let’s examine additional questions that were asked of the seniors through anonymous “clicker” technology.

The bankers, which represented 19 states and Mexico, were asked what the reported unemployment rate would be in June 2014. Forty-one percent of the bankers indicated that the reported unemployment rate would remain about the same, between 7.0% and 7.4%. Surprisingly, 31% of the group felt the unemployment rate would decline to 6.5-6.9%, and 6% of the bankers expect unemployment to fall below 6.5%. If this was to occur, it would be a definite indicator to the Federal Reserve to raise interest rates. Nearly a quarter of the students responded that the unemployment rate would move higher above 7% and possibly above 8%. This response illustrates the uneasiness of business professionals concerning future employment possibilities.

An interesting question focused on the number of U.S. banks remaining by the end of the year 2020. This is a major topic of conversation with increased regulation and consolidation being a critical issue. Nearly a quarter of the group indicated that there would be 4,000 or fewer banks in 2020, compared to 7,000 today. The most common response was 5,000, with 40% selecting this option. The remaining 35% responded that there would be between 6,000 and 7,000 banks, little change from current numbers. Many banks are family owned, particularly community banks. The general consensus is that the next generation is hesitant to return to the banking industry, which could result in possible consolidation.

Producers, think about these bankers’ responses. Will your bank be around in seven years?

 

Editor’s note: Dave Kohl, Corn & Soybean Digest trends editor, is an ag economist specializing in business management and ag finance. He recently retired from Virginia Tech, but continues to conduct applied research and travel extensively in the U.S. and Canada, teaching ag and banking seminars and speaking to producer and agribusiness groups. He can be reached at sullylab@vt.edu.

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Dave Kohl is an ag economist specializing in business management and ag finance. He can be reached at sullylab@vt.edu.

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