What Obama Re-Election Means for Banks

Ah, perhaps the irony found in the election results last night is that everyone was surprised. But the surprise was found in that nothing really changed – everyone thought there would be at least one big shakeup. Now though, it’s what lies ahead that folks are now looking towards. Bank executives especially are watching to see how a lot of events begin to unfold, including the fiscal tax and the realization that with President Obama’s second term comes the realization that Dodd Frank will continue to police the efforts of banks and credit card companies in the U.S. Here are a few other banking considerations that present a new day and political front in our country.

*It should be noted that as we prepare to go to press this morning after the election, the Dow is down close to 350 points. This doesn’t affect the results from the report below, but it does provide a bit more insight into the uncertainties.

What we found was a surprising amount of optimism and confidence, despite the now im-possibility of rescinding Dodd Frank. This means the Consumer Financial Protection Bureau continues to move forward with its many efforts of leveling the playing field for consumers. There remain many global uncertainties; however, this is common for bank executives, few things rarely are certain.

New Report

Recently, a report was released, The Bank of America Merrill Lynch CFO Outlook Fall 2012 Update, and constitutes a leading survey of American financial decision-makers, including bank and credit card CEOs. The findings were interesting and you might be surprised their concerns are likely ones you share.

As we mentioned, bank executives are currently positive, despite not being able to put Mitt Romney into office. He would have been the one to kick Dodd Frank and other financial laws to the side. In fact, so confident they are that the number of positive CFOs has grown from the numbers in 2011. The most recent numbers show CFOs rate the domestic economy 53 out of 100, which is indicative of a nine point improvement over the past year. Not only that, but the U.S. manufacturing (56) and services (62) sectors also continue to receive high marks. The weakness, according to these financial minds, is found in global uncertainty, which continues to worry CFOs. In fact, confidence in this area dropped two points.

As far as the economy, most agree that better times are nearing; however, most also agreed that we wouldn’t see any growth until well into 2013. More than half believe nothing changes with the economy through the end of the year. Thirteen percent expect further problems before we ring the new year in.

Frail Economy

Ah, but CFOs have plenty of concerns. Most all agreed that the collective economy is “frail” and they say they still have uncertainties. Interestingly, they said the election concerned them (the results were released a few days before Americans went to the polls). A majority of CFOs are greatly concerned about the effectiveness of U.S. government leaders; 70 percent agree. The budget deficit worries 61 percent, health-care costs have 60 percent worried and global market unrest is on the minds of 55 percent of these CFOs. Both unemployment and consumer confidence worries 55 percent of those polled.

There’s one area that most aren’t overly concerned about and that’s their own bank’s bottom lines. 2012 revenues and profits are expected to equal or exceed those of 2011, said more than 90 percent of those polled. Not only that, but individual corporate confidence remains consistent too. Most say they expect to beat profit expectations by the end of the year.

Big Concerns

So what do these banking officials recommend for the president (remember – this poll was conducted before the election)? Here are a few of their thoughts from the report* (and if you’re thinking their thoughts mirror yours, you’re right – most Americans rank these concerns in the same order as the bank CFOs):

  • The business tax code is too complicated
  • The federal budget must be balanced
  • Big challenges await those government leaders who prevail in November.

Those three things, agree those polled, would significantly improve “our nation’s current economic conditions”. Other concerns include an effective government must be put into place, the health care costs must be monitored and reined in, the U.S. unemployment levels must drop, consumer confidence and consumer spending must increase and oil prices must find a level field. Corporate taxes concern them, though to lesser degrees and banking laws are too problematic for them and their banks.

What are your thoughts on this survey? Did the bank officers get it right or are they too far out of touch? We’d love to hear your thoughts on this story and while you’re at it, let us know your thoughts on last night’s election. Did your candidate win?

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