Finance industry executives are bullish, regardless of rate hikes
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Bank, credit union, and investment market executives here are mostly bullish about the coming year, despite potentially growth-dampening effects of anticipated Federal Reserve rate hikes and uncertainties stemming from the recent presidential election.
The Fed was scheduled to meet earlier this week, and was expected to raise the federal funds rate—the interest rate that banks charge other banks on overnight loans—by 25 basis points or possibly more. The federal funds rate is an important benchmark in financial markets and affects many other loan rates.
Even with additional possible federal funds rate hikes next year, rising interest rates on commercial and consumer loans would remain low by historical stands, and financial sector executives are optimistic about the potential for a continuation of the largely strong gains they’ve seen this year.
“I think we’re feeling optimistic about this coming year. 2016 was certainly better than 2015, and we expect that trend to continue,” says Linda Elkin, U.S. Bank’s Spokane-based regional vice president for Eastern Washington and North Idaho.
“If rates are increasing, it means the economy is improving, and that’s a good sign,” Elkin says.
Kurt Walsdorf, Bank of America Merrill Lynch’s market president for Spokane and state president for Idaho, is similarly upbeat, saying, “I’m very bullish on 2017.”
General optimism about potentially improving regulatory, tax, and economic policies following the victory by President-elect Donald Trump have given stocks a lift, but the election outcome also has created some policy-related uncertainty.
Locally, though, Walsdorf says he believes the strengthening of Spokane’s downtown core and growth in a number of industry sectors here have improved the area’s financial vitality and sense of well-being. “I think there’s just a general feeling of optimism in our community,” he says.
Larry Sorensen, CFO at Spokane-based Washington Trust Bank, which has led all banks in deposits in Spokane County for seven straight years, says he expects that institution to see loan growth of around 6 percent in 2017, which would be similar to this year.
Of anticipated rate increases, he says, “I don’t think that that’s going to have a significant impact on the level of business activity.”
Overall, Sorensen says, 2016 has been a “terrific year” for Washington Trust. Among other benchmark indicators, he says, “Asset quality is terrific. It’s as good as it was back in ’05, ’06, or ’07,” before the Great Recession.
Executives from the Spokane area’s two largest credit unions, STCU and Numerica, say they anticipate more strong growth in 2017 after experiencing big gains this year, although the volume of auto loans could weaken slightly.
Tom Johnson, president and CEO of Liberty Lake-based STCU, says that credit union has experienced loan and asset growth of about 13 percent and 11 percent, respectively, this year, and anticipates similar, though perhaps slightly slower growth in 2017.
Reflecting as Walsdorf did on the public and private capital project investments in the Spokane area, Johnson says, “I’m very encouraged.”
STCU opened a new Qualchan branch in southwest Spokane earlier this year and plans shortly to open a downtown Coeur d’Alene branch, which will be its 20th overall. Its plans for next year include moving its downtown branch to River Park Square and opening an Airway Heights branch at Hayford Road and U.S. 2.
Cindy Leaver, Numerica’s CFO and chief strategy officer, says that credit union is aiming for loan and deposit growth of around 10 percent next year. It expects to end this year with total loan growth of 17 percent or 18 percent.
“We do think the auto industry could slow down a little bit. It’s been running pretty hot for a long time now. We just had a huge year in 2016,” she says.
Numerica opened a branch in Post Falls this year and is looking at opening one and possibly more branches in the Tri-Cities, Leaver says.
Tim Vorpahl, founder and CEO of Vorpahl Wing Securities Inc., of Spokane, anticipates investor confidence remaining strong through next year’s first quarter and perhaps longer.
The first years of new presidential administrations historically have been negative for the markets, he says, but he adds, “All of those historical numbers may come to an end.”
This article originally appeared in the Spokane Journal of Business on December 15, 2016.