The number of bank chief executive officers expecting a recession in the next six months has declined since late 2022, but a majority still think a downturn is likely, according to the latest Wisconsin Bankers Association survey.
The WBA survey found 71% of bank CEOs in the state think a recession is likely or very likely in the next six months. At the end of 2022, 87% of those surveyed held those same views. There’s also been a shift in the conviction of those expecting a recession with very likely dropping from 25% to 15% and likely dropping from 62% to 56%.
Still, recession expectations remain higher than a year ago when 61% of those surveyed expected a recession, including 45% saying one was likely and 16% saying very likely.
The survey was conducted May 16 to May 31 and includes 66 respondents.
Bank executives were more split on the outlook for the Wisconsin economy with a majority, 52%, expecting it to remain the same over the next six months, up from 28% in the December survey. The end of the year survey also found 72% expecting Wisconsin’s economy to weaken, a figure that dropped to 48% in the latest survey.
No bank executives surveyed anticipated growth in the next six months.
Bank CEOs' current view of the Wisconsin economy was mostly unchanged with 68% describing it as "good" and 5% saying it is "excellent," down one point from 69% and 6% at the end of 2022.
Within the business of banking, the biggest shift from the late 2022 survey came on deposits. In December, 47% of bank CEOs said deposit demand was "good" or "excellent," a figure that dropped to just 20% in the latest survey.
The number of respondents describing deposits as "fair" climbed from 44% to 58% and the number describing them as "poor" went from 9% to 23%.
Banks have seen increased attention on their deposits over the past several months following the collapse of Silicon Valley Bank. However, bank deposits, which increased sharply over the course of the pandemic, have also been under pressure as inflation begins to eat into the savings of consumers and businesses and some customers seek better returns amid rising interest rates.
FDIC figures for the first quarter released
this past week showed deposits at Wisconsin banks declined 1.56% from the end of 2022.
Bank CEOs are slightly more optimistic than they were in late 2022 about deposits looking forward with 17% expecting deposit growth over the next six months, up from 13%. A majority, 52%, expect deposits to remain the same, up from 49% in December.
As for what banks do with the money once they take it in as a deposit, executives were slightly more bullish on business lending and had a better outlook for both commercial and residential real estate when compared to late 2022.
For business lending, survey respondents were evenly split with 50% describing current demand as "good" or "excellent" and 50% saying it is "fair" or "poor." In December, those figures were split 47-53 toward the negative.
Looking ahead, 50% of CEOs expect business borrowing demand to weaken over the next six months, down from 56% in December. Just 6% expect growth in business borrowing, down from 8% previously.
On commercial real estate, 44% described demand currently as "good" or "excellent" up from 40% in December.
A majority, 56% still expect CRE demand to weaken in the next six months, down from 63% in December. Another 9% now expect growth over the next six months, up from 1%.
For residential real estate, 19% say demand is "good" or "excellent," up from 11% in December but down from 22% a year ago. Half of respondents said residential demand is "fair," the same as this time in 2022.
The big shift in residential lending has come in the outlook. A year ago, 63% expected the category to weaken over the next six months. By December, the figure was down to 54% and it reached 25% in the latest survey.
While some executives have become more bullish on residential – 13% now expect growth, up from 6% in December and 4% a year ago – the majority, 62%, expect things to stay the same.
