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A survey asking U.S. community banks for their outlook on the economy shows how quickly the coronavirus pandemic affected bankers’ views.
The Conference of State Bank Supervisors’ quarterly Community Bank Sentiment Index (CBSI) fell 32 points to 91 from 123 at the end of the fourth quarter, the first significant decline since the index started in the second quarter of 2019, according to a statement from the CSBS, the national organization of bank regulators for U.S. states and territories.
Comparing results received in early March to later in the month shows how sentiment shifted. The CBSI declined throughout March as more survey responses were received, according to the CSBS, from an average 98 points at the beginning of March to an average 71 by the end of the month.
The World Health Organization declared COVID-19 a pandemic on March 11.
“As the COVID-19 virus became more widespread, community bankers quickly started to see the local impact,” CSBS President and CEO John Ryan said in a statement. “Fortunately, these banks are well positioned to work with their customers in a potential downturn.”
The CBSI captures what community bankers nationwide think about business conditions, monetary policy, regulatory burden, capital expenditures, operations expansion, profitability and franchise value.
The CSBS analyzes answers and compiles them into a single number: an index reading of 100 indicates a neutral sentiment, above 100 indicates a positive sentiment and below 100 indicates a negative sentiment.
The results also showed that six of the seven CBSI components declined from the last survey, with five components dropping more than 35 percentage points each: business conditions, monetary policy, operations expansion, profitability and franchise value.
Outlook on business conditions had the lowest index reading at 60, followed by profitability at 66. Despite dropping almost 50 points, outlook on operations expansion had the highest index reading at 128. Franchise value (121) and capital expenditure (117) were the other components above 100.
Only sentiments about regulatory resulted in a higher index reading: 78 in the first quarter compared to 71 last quarter. Most respondents in the first quarter, 57 percent, said regulatory burden would be the same as today, while 31 percent said it would be worse.
