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Ky Banking Outlook: Defining the ‘New Normal’

By wmadministrator

2011 is shaping up as a year in which the economy in Kentucky slowly builds positive momentum, according to leaders in the state’s financial community who responded to The Lane Report’s request for their views on the economy. They and their customers are seeing slow improvement. Several indicate the business world is still in the process of identifying the parameters of a ‘new normal’ for operations. The overall mood, as with other sectors of the economy, is one of cautious optimism. Conditions are favorable for borrowing and increasing exports, but unemployment levels need to fall significantly further to bring recovery to the housing market and the overall economy.”

Thomas P. Hinkebein
Whitaker Bank

“During 2010 there was certainly a mix of good and bad economic news, yet the economy has made progress from its near collapse in 2008/2009. The challenge for 2011 will be job growth: it creates consumer spending, business investment and then additional job growth. Once we have meaningful job growth, housing will recover. There was a slight improvement in unemployment the last half of 2010, and I am hopeful that a slow steady improvement will continue throughout 2011.”

Steve Trager
Republic Bank

“As the U.S. economy is impacted by global events, Kentuckians are paying more for necessities such as food, heating and gasoline, which makes dreams of home ownership or expanding a business more challenging. The largest commonwealth-based community bank, Republic is optimistic and investing in Kentucky by lending now to individuals, families and businesses.”

Paul Costel
Chase in Kentucky

“Chase has seen a tremendous increase in our business customers’ demand for
lending, which is a sign that the economy has turned a corner. Although Kentucky’s jobs forecast is much weaker than the national forecast, we expect our local economy to accelerate in 2011 to a robust pace, helping to stabilize employment. Consumer demand for loans and investments is also up significantly from last year, another sign that our economy is on the mend.”

Tom Partridge
Fifth Third Bank Kentucky

“I believe the theme for 2011 is ‘Getting Back to Business.’ This should hold true for Kentucky and nationwide. The environment is one where business now should be thinking about how to rebuild top and bottom lines. The ingredients should all be in place: rising consumer confidence, relatively low borrowing rates, increased business spending, twin government tailwinds of accommodative fiscal and monetary policy, and a relatively range-bound U.S. dollar index to support export growth.”

Josh Nagel
Merrill Lynch – Louisville Complex

“According to the 2011 Outlook, we are in the midst of a rebalancing of the global economy, and emerging markets are at the heart of this shift. This rebalancing does create opportunities for investors, but it’s important to remember not all emerging markets are the same. Investors should be diligent about selecting the right markets for their personal portfolio because political, social and fiscal issues all affect whether an emerging market is a smart investment. Additionally, it is important to diversify investments across emerging markets, the same way you would across asset classes. Work with your financial adviser to identify the best industries and companies in each geography.”

Louis Prichard
Kentucky Bank

“Difficult times test the strength of strategies and management. Kentucky Bank has weathered the economic storms fairly well so far: We closed out 2010 with a small increase in earnings, and 2011 is off to a positive start. Many banks have had to suspend their lending efforts. We are still very much interested in new, quality lending relationships. Our focus has been on strengthening relationships with our current customer base as well as exploring new opportunities.”

Bill Alverson
Traditional Bank

“Modest economic growth and some reduction in the unemployment rate are anticipated in the coming months. Kentucky’s geographic location continues to give it a competitive edge for companies to locate and expand. Small businesses create a significant portion of jobs, and we have been partnering with the Small Business Administration for almost 30 years. Being an SBA Preferred Lender enables Traditional Bank to make quicker response on loans for acquisition and expansion.”

John T. Taylor
President & CEO
American Founders Bank

“We continue to see signs of the economy picking up positive momentum throughout Central Kentucky. However, there is particular concern in the rate of recovery in the important segments of residential and commercial real estate. Overall, Kentucky banks are well poised for 2011 to help individual and business customers with their financing needs. Having the banks in this position is very important to the health of our overall economy.”

Luther Deaton Jr.
Chairman, President & CEO
Central Bancshares

“The economic recovery has been slow to take off because employment has not really improved. Consumer spending appears to be regaining some momentum, but it has not really impacted home sales yet. We expect home and automobile sales to improve slowly, as mortgage interest rates continue at very attractive levels. We also anticipate interest rates will stay at current levels for most of the year. Community banks are dealing successfully with these economic issues but will have to devote considerably more time and resources to respond to new regulations and capital guidelines that have taken effect.”

J. Daniel Rivers
Managing Partner
Northwestern Mutual – The Kentucky and Southern Indiana Group

“The financial industry is in the middle of defining a ‘new normal.’ Over the last couple of years, there’s been a fundamental shift in how Americans view and manage their finances. People in large numbers have become very conservative with their money, distinctly preferring long-term stability over short-term growth. Because consumers are placing an emphasis on long-term safety and security, the financial strength of individuals and institutions will be much stronger in the future.”

Jean R. Hale
Chairman, President and CEO
Community Trust Bancorp

“National and local economies continue to show signs of improvement. However, the improvement, like the downturn, varies within communities and states. Community Trust sees diversity in the economic base of the areas we serve in Kentucky, West Virginia and Tennessee. Kentucky entered the economic downturn slower and with less severity than other states, and our recovery will be slower and less dramatic. Increased employment, small business activity and consumer confidence are necessary for continuing improvement in economic conditions.”

William “Bill” J. Jones
U.S. Bank
Community Banking – South – East Division

“U.S. Bank has a presence in 36 counties across the commonwealth, more than any other bank in Kentucky. In our conversations with a broad representation of individuals, business owners and CEOs, we are beginning to see and hear signs of cautious optimism. The real question remains: What will the ‘new normal’ look like? On the interest rate front, it appears the desire of the Federal Reserve is to keep rates relatively low, which should continue to encourage economic activity. As one of the strongest financial institutions in the United States, we at U.S. Bank look forward to continuing to be a key component of the financial engine that drives this economy.”

Mark Herren
Chairman & CEO
Bank of the Bluegrass & Trust Co.

“Cautiously optimistic best describes our general business outlook for 2011. Local independent community banks realize the challenges small businesses continue to confront daily. However, it is encouraging to see the resilience and determination displayed by business owners as they persevere despite the economic climate. We have learned to ‘sharpen our tools,’ which has created increased demand for credit even though credit standards remain tight. We are seeing continued growth in our financial services and wealth management areas.

John Gardner
Senior Vice President, Bluegrass Complex
Wells Fargo Advisors

“Our 2011 outlook is positive. We believe the markets should continue to improve, driven by growing private sector employment and corporate earnings. International unrest, budget deficits and rising interest rates are our primary concerns. We are excited about our local market share growth and look forward to opening our third new office in four years. Our goal is to become the destination of choice for Kentucky’s most sophisticated clients and advisers.”

Robert Schneider
Senior Vice President–Investments
UBS Financial

Services“The U.S. continues to be the major player in a very global economy, but, like it or not, we are dependent upon the health and stability of other nations’ economies as both consumers and producers. Global investing and portfolios that participate in global (rather than pure domestic) expansion and incorporate alternative asset classes alongside traditional investments will limit the volatility we are certain to experience in an unmistakably chaotic world.”