The banking industry is strong but being “crushed” by overregulation, John Asbury, CEO of Virginia-based Atlantic Union Bank and the American Bankers Association’s recently elected chair, told attendees this morning during ABA’s Agricultural Bankers Conference in Milwaukee. Kicking off the annual event, Asbury shared his assessment of the current state of the banking sector and what he expects for the near future, particularly given the results of the recent elections.
“This industry is profitable and well capitalized, and asset quality is the best I’ve ever seen throughout the industry, and I don’t see the economy falling off a cliff,” he said. “I’m actually fairly optimistic.” One of the biggest challenges, Asbury said, has been the “whipsawing” of interest rates, and its effect on banks’ net interest margins, which he attributed to what happened over the course of the pandemic and attempts to keep inflation at bay.
The “single largest challenge” banks face is overregulation, Asbury said. “Now we have an important opportunity, perhaps a historic opportunity, to turn back that tide. We’re not going to get everything we want, and it’s not just going to come to us. It’s going to take advocacy, but the opportunity is there. This [regulatory] tsunami has crushed the industry. It’s driven a lot of consolidation. The diversity of the banking system is part of the strength of the American economy, and we need to preserve it.”
Asbury believes the policies of the incoming Trump administration “will be helpful” to the industry and the economy but may be “somewhat inflationary,” predicting that interest rates may not fall as quickly as many would hope. “We have a number of borrowers who’ve effectively been on the sidelines, waiting on a lower-rate environment,” he said.
The Federal Reserve will continue to cut rates but perhaps not as much as we thought, Asbury said. “I’m not convinced term rates are going down at all, and that is bad news for the mortgage business. We’re going to have a bit of a higher rate environment for longer, at least with term rates. That should mean a steepening of the yield curve, which is good for our industry in terms of profit margins.”
The other issue Asbury cited as a primary focus for his time as ABA chair is helping the banking industry to combat fraud.
“We probably all understand that there’s more good, old-fashioned check fraud today than there was before the pandemic,” he said. “And ABA, I think, is doing a very good job in terms of helping to educate, and there’s some exciting things underway that could involve congressional action and legislation to beat back fraud and make it harder on the fraudsters. That’s a big, big deal. It impacts every one of our banks, regardless of size.”
