You could say 2015 was another year of flux for the banking industry in Charlotte and elsewhere.
I think we can safely expect more of the same next year.
A confluence of factors, including post-financial crisis regulations, low interest rates and the rising popularity of mobile banking, continues to bring about change in the industry.
Here are five trends to keep an eye on in 2016:
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▪ Interest rates: Earlier this month, the Federal Reserve raised its benchmark short-term interest rate for the first time since the central bank lowered it to near zero in 2008 during the Great Recession. The Fed is expected to raises rates further next year, but increases will be gradual.
In theory, this is good news for savers who have been making almost no money from their savings accounts and certificates of deposit, but they shouldn’t get too excited.
This month’s one-quarter percentage point increase by the Fed might not bring much change to what banks pay in interest – although banks are already charging more to lend. As bankers and industry experts told me last month, banks are sitting on a lot of cash, giving them little incentive to raise interest rates to lure more deposits. Also, increases in what banks pay in deposit rates typically lag Fed increases in short-term interest rates.
▪ Enhancements to mobile banking: Look for banks to keep upgrading their mobile phone technology as they seek to compete in this rapidly-evolving space. Next year, Wells Fargo says it will introduce technology allowing customers to conduct an ATM transaction with a smartphone, eliminating the need to swipe a card. Bank of America also says it plans to start piloting similar technology next year. You can bet those aren’t the only changes banks will announce to their mobile offerings in 2016.
▪ More branch cuts: As customers conduct more transactions on phones, some banks have been trimming their branches – a move that has helped reduce expenses at a time when costs have risen in other areas, such as cybersecurity. For example, earlier this year JPMorgan Chase said it planned to cut about 300 branches by the end of 2016. Last month, the co-head of Bank of America’s consumer banking operation said the bank will continue to pare branches as it remains focused on lowering its overall expenses. Bank of America’s overall branch count has fallen by roughly 100 this year and by about 1,200 since CEO Brian Moynihan took over in 2010.
▪ Mergers and acquisitions: In recent years, community banks in Charlotte have joined a wave of dealmaking among smaller banks, even as big banks stay out of the merger game. Some recent examples: In 2012, BNC Bancorp acquired Charlotte’s First Trust Bank. Last year, HomeTrust Bancshares bought Charlotte’s Bank of Commerce. And just last month, Charlotte’s CommunityOne Bancorp announced it will be acquired by Capital Bank Financial Corp.
It would not be surprising if more deals are announced in 2016. Bankers say low interest rates, rising regulatory costs and difficulties growing loans are motivating them to improve profitability through mergers and acquisitions.
▪ Layoffs: Banks nationwide have eliminated tens of thousands of jobs in recent years, and Charlotte has not been spared. Much of that slashing has been in the mortgage business, which banks have scaled back as they adjust to swings in refinancing and delinquencies. This year, Wells Fargo and Bank of America both announced layoffs affecting Charlotte-area mortgage staff. Bank of America has also announced layoffs this year in its Charlotte technology operations.
In October, Moynihan said he expects Bank of America’s employee count to keep falling, in part from attrition, as the bank looks to further trim costs.
We’ll learn if big banks shed more employees when they report fourth-quarter and year-end financial results next month.