Banking on the Future: Looking at the Industry in 2020 in the Garden State

Banking on the Future: Looking at the Industry in 2020 in the Garden State


THE NEW JERSEY economy is largely driven by the national economy—if it stays strong, then loan demand will continue to be healthy and New Jersey banks will prosper. However, if there’s a national slowdown, then the environment here will also be more challenging. Fortunately, the economy looks like it’s going into 2020 on a posi­tive note.

The historically low interest rate envi­ronment will be a challenge—it’s good for borrowers, but not so good for savers. Additionally, the squeeze on margins [the narrowing difference between banks’ cost of money and the interest rates they can charge for loans] may be a challenge to profitability.

The China trade issue is another potential concern—although it doesn’t directly impact all New Jersey businesses, the uncertainty surrounding it can cre­ate a lack of confidence when it comes to hiring and capital expenditures. If it’s resolved, the economy will likely get a positive shot in the arm.

Some other positive points include New Jersey’s real estate market, which has remained relatively healthy overall, especially the multifamily segment. And overall, the federal regulatory environment is favorable, with potential amendments and upgrades to the Bank Secrecy Act and approaches to AML [anti-money laundering] compliance. Federal banking agencies [OCC and FDIC] are also expected to soon announce new, streamlined changes to the CRA [Community Reinvestment Act].

In New Jersey, as elsewhere, we expect to see continued consolidation among banks. This is partly due to increased regulatory costs—banks need to spread them over a wider base—but we’re also seeing fewer branches as more people do their bank­ing online and through mobile devices. The industry is evolving, though, with smaller branches that offer more technological features that make it easier for customers to complete trans­actions, and bankers are changing as more move to the “universal banker” model where a single employee can assist customers across multiple tasks.

Most community banks in New Jersey are also continuing to embrace digital advances, some in a very innovative way. They recognize the need to have advanced digital capabilities to enhance the customer experience, or they’ll lose them—especially to larger banks and nonbanks. Some banks here are work-ing with their core service providers to expand their digital offering, while some others are partnering with or acquiring fintechs.

I’ve got some concern about the 2020 election, and the uncertainty it’s gener­ating. That’s not good because uncer­tainty often means there’s less incentive for investment. The results of the elec­tion could also influence the wider economy and the banking profession. Will taxes rise? Will we see more regula­tion? These are key questions that are being asked.

Bankers, however, are continuing to innovate, and are stepping up their use of technology while improving opera­tions and customer service. The race for talent acquisition continues to be com­petitive, particularly with the low unem­ployment rate, but banks are stepping up their recruitment efforts, along with initiatives such as enhanced training, and cross-training, which appeal to the next generation of employees.

Overall, New Jersey banks are strong, well-capitalized and liquid. There may be some economic challenges ahead, but our bankers have been through them before, and are very good at risk-management, and at managing cash flows. They are also monitoring their portfolios and other assets, and will make any adjustments that are needed.

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