The U.S. banking industry remains solid despite higher interest rates and the fallout from the bank failures earlier this year, but the wider economy is slowing, the CEOs of four banks said today during a panel discussion at The Clearing House’s annual conference in New York City.
“With all that we’ve all gone through in recent years, you would think the economy would be much worse,” said Michael Roberts, president and CEO of HSBC North America. Among other things, he noted that the Federal Reserve has raised interest rates 11 times since early 2022. “We’re holding up much better than you would expect, and I think that’s true for the entire banking system, which has done quite well,” he said.
Commercial real estate, which has received much media attention, is an issue, “but not nearly as bad as you expect,” Roberts added. Curtis Farmer, president and CEO of Comerica Bank, said his institution is weighted more toward family and industrial real estate, and in those sectors, it has seen a slowdown in demand for projects as developers pull back. Still, there have not been a lot of rent concessions in either major metropolitan and suburban areas, he added.
The CEOs also were asked about whether banks could have better prepared for the fallout from the Silicon Valley Bank failure. Andrew Cecere, president and CEO of U.S. Bancorp, said the speed at which deposits fled the bank was a wakeup call for him and others. “Even as the industry talked about the digital age and how deposits can move more rapidly, it hadn’t done that until Silicon Valley Bank,” he said.
William Demchak, president and CEO of PNC Financial Services Group, said that banks were prepared, but that he didn’t understand why regulators didn’t come down harder on SVB’s poor management of interest rate risk given that has not been his bank’s experience with supervisors. “At the end of the day, if people are incompetent in their job, either the management or the regulators, you can have failures,” he said.