Compared to other Banker & Tradesman readers, bankers are apparently a bunch of rosy-cheeked optimists when it comes to both the 2010 residential housing market and their own business prospects.
Bankers aren’t predicting a return to boom times, but they’re more confident recovery is on the way: Bankers who replied to a recent Banker & Tradesman/Bannon & Co. reader survey regarding their outlook for 2010 were more likely to predict modest improvements for single-family home construction loans, sales, mortgages and jumbo mortgage loans than other readers. Other respondents, meanwhile, were likelier to predict no growth or moderate decreases.
Most bankers also seem serene about their own prospects, saying they foresee a modest increase in sales, office locations, employees and budgets this year: About 70 percent of bankers expected a moderate increase in sales, compared to 50 percent of other respondents. The other half of the latter group thought their sales would be flat or worse in 2010.
Another 70 percent of bankers said they and their peers would probably liquidate their foreclosed properties in 2010, whereas only about half of other types of respondents thought real estate owned properties would likely be liquidated this year.
“It’s true – a lot of banks are doing very well,” said William Kozak of Rockport-based consultancy WTK Assoc. A few are troubled, he said, but the survey seems to have tapped into the sunnier vein of Massachusetts bankers.
Whistling In The Dark?
Bankers might also come off as more cheerful in comparison to other survey respondents, many of whom are real estate, development or construction professionals.
“I know people in real estate,” Kozak said. “It’s not a happy place right now.”
Massachusetts bankers might certainly feel fortunate compared to their peers in states such as California, which are experiencing a “bank apocalypse” right now, said Kevin Bottomley, president and CEO of Danversbank.
But Bottomley was leery about 2010. “I’m less optimistic than I was three to four months ago,” he said. “Our client base is still struggling.”
Banks can gauge their health based on their customers’ economics, he said, and there are still too many financially troubled people and businesses out there. Danversbank has enough capital to expand its commercial operations and perhaps a couple branches, but Bottomley stopped short of predicting a fat 2010.
In general, respondents to the 2010 Massachusetts economic survey predicted this year will bring a continuation of the same trends that marked much of 2009, with most respondents saying the overall economy would remain similar to last year, with only moderate changes for better or worse.
Bankers in particular were seeing the brighter side of the single-family housing market. Half believe condo sales will increase. And although almost a third (32 percent) of bankers thought foreclosures would increase in 2010, none thought they’d go up substantially, while 16 percent of other respondents predicted a hefty jump in foreclosure activity.
And despite the argument over whether banks are doing enough commercial lending, Banker & Tradesman readers in the industry believed small business loans would be easier to get in 2010: 64 percent of bankers thought loans were “very likely” to be available at reasonable terms, and 12 percent thought it was extremely likely – that’s compared to the almost 50 percent of other respondents who thought such loans were very unlikely or not at all likely to be available.
“One thing that everybody forgets, and that the national press actively chooses not to believe, is that bankers like to make loans. It’s how they make money,” said Suzanne Moot, owner of M&M Assoc. in Milton.
Short-Term Gain, Long-Term Pain?
Still, some had reservations about the recovery.
Stanley V. Ragalevsky, a partner with Boston-based K&L Gates, said bankers might feel chipper about their short-term prospects, but the banking industry in Massachusetts faced some fairly serious systemic problems.
“While we may have fewer problem banks, we have less profitable banks than other states across the country,” he said. Healthy banks in other regions tend to have high profitability and plenty of opportunity for expansion. In New England, on the other hand, the market is fairly saturated with banks and those banks tend to have lower return on assets.
Those larger issues are going to do long-term damage; Massachusetts might not have failed banks, but it will have plenty of absorbed banks in the years to come, he said.
“I’m actually kind of shocked that you’ve had so many [banks] talking about how rosy the picture is,” he said.
Kevin Kiley, COO and executive vice president of the Massachusetts Bankers Association, emphasized that expectations were optimistic, but only moderately so. Most expect recovery to be slow, and much is contingent on how government involvement, such as Small Business Association programs, pan out.
For now, bankers are biding their time and seeing which way the wind blows.
“I don’t think it’s going to be a significant turnaround,” he said.
