Bankers come out of tough year with higher expectations for ’22

Bankers remain bullish as they spend a year rocked by loan cuts, excess liquidity fueled by rising deposits and stable interest rates.

Stephens Inc. has hosted over a dozen of the nation’s largest public banks, including all three in Arkansas, to gain insight into their future economic expectations and prospects and how they influence balance sheets going forward. The annual conference in Nashville took place December 1-3.

For the most part, lenders indicate they are happy with the direction taken, with Stephens’ banking team noting that loan growth appears to be accelerating. Overall, Stephens found that “banks remain broadly optimistic about the prospects for growth in core markets from a new origination perspective”, although other issues such as pressure on earnings and line utilization rates may also come into play.

Another hot topic of the conference centered on sensitivity to interest rates amid consistent forecasts that rates will rise – to the benefit of banks – if inflation continues to set in.

The rise in bank deposits triggered the liquidity issues lenders faced throughout 2021 and Stephens noted that institutions continue to experience strong growth in deposits. Some lenders believe that deposits may not be transient and could remain in coffers, giving bankers more confidence in increasing portfolio investments, which could increase profits.

The management teams of Bank OZK of Little Rock, Home BancShares Inc. of Conway and Simmons First National Corp. de Pine Bluff met with analysts at Stephens during the conference.

Here are the main conclusions of the discussions:

OZK Bank: Loans rose above market expectations in the third quarter and management expects positive loan growth in the current quarter ending December 31 and next year in its community banking division. The more recreational recreational and marine vehicle portfolio is expected to experience net growth next year.

In July, the bank announced its first share buyback program in company history with $ 300 million clearance and increased the program to $ 650 million in October and issued $ 350 million. preferred shares. The report predicts that OZK will start repurchasing shares before the authorization expires in November 2022.

Home BancShares: The lender bought Happy Bancshares of Texas in a $ 919 million transaction that is expected to close in the first quarter. Once that happens, the Stephens team predicts that Home “will be an active acquirer in the Texas market” very quickly.

Either way, profits will be increased next year, as the Happy deal is expected to be immediately accretive. Nonetheless, the bank continues to struggle to stimulate loan demand, even though it experienced a solid September with net loan growth.

Home BancShares repurchased 400,000 shares in the third quarter and still has 22 million shares available. The Stephens report predicts that buyout efforts will remain active next year.

Simmons First: Pine Bluff Bank also stirred the M&A pot, buying and closing two community banks in Tennessee to strengthen its presence in Memphis and Nashville, then jumped into high growth markets in Texas with the purchase of Spirit of Texas Bancshares Inc. The $ 581 million purchase is expected to close in the second quarter and will open the Austin, Dallas-Fort Worth, Houston and San Antonio markets to Simmons, which is also experiencing a growth slump in ready.

Stephens expects stable loan growth this quarter before lending resumes next year. Simmons could see its profits rise by continuing to deploy excess liquidity in its portfolio of investment securities, which would be beneficial if interest rates rose.

GRANT WORKSHOP

Arkansas community and economic development leaders can learn more about grants and other resources available to foster growth at a workshop scheduled for Tuesday at 10 a.m.

The event will offer tips and ideas for applying for grants administered by the Arkansas Economic Development Commission. These workshops will also serve as an initial public notice of the availability of funding as part of the competitive cycle of General Aid Set-aside, a program that provides cities and counties with the ability to apply for funding for projects. public infrastructure and public equipment.

The funds come from the US Department of Housing and Urban Development.

Funding is available for community-based programs that benefit at least 51% of low- and moderate-income residents, eliminate slum or plague conditions, or address other urgent economic needs such as residential water and sewage, drainage, streets and roads, centers for the elderly, health centers, public health clinics, shelters for battered spouses, child advocacy centers and facilities for severely disabled adults.

Grant applications can range from $ 75,000 to a maximum of $ 300,000, and up to $ 1 million for new water and sewer connections. More information is available at arkansasedc.com/grants.

THE HARP ARRIVES IN ENGLAND

Harps Food Stores Inc. opened its new store on Wednesday with a location in England.

The store is now open at 301 Pine Bluff Highway in a location Kroger left over the summer. Harps supplies fresh produce and goods to nearly 2,800 people in England.

Harps, based in Springdale, operates more than 115 local supermarkets and grocery stores in Arkansas, Oklahoma, Missouri, and Kansas. The company also operates grocery stores under the Food4Less and Cost-Plus brands, among others.

LEARN MORE ABOUT THE FUTURE

The Arkansas Bankers Association and the Arkansas State Chamber of Commerce are teaming up to host an event to provide an overview of the forecast for the 2022 economy. The event will take place from 10 am to 11 am on January 23.

The forecast will provide more information on the industry’s output, city and downtown growth, consumer spending, and overall growth projections for the state and region, including trends and patterns. economic.

Presenters include Michael Pakko, chief economist of the Arkansas Economic Development Institute, and Tyler Mondres, economist of the American Bankers Association.

The cost is $ 50 for members and $ 100 for non-members. Registrants will receive a link to join Zoom events.

Ideas for columns or recommendations? Any thoughts or reflections that need to be continued? Contact me at [email protected] or at 501-378-3567.


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