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Top banking executives predict US recession in next 12 months – KPMG survey

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According to Market Intelligence, December 2022

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Top banking executives predict US recession in next 12 months – KPMG survey

The U.S. economy is likely to go into a recession in the next 12 months, according to executives from the biggest banks who were surveyed by the accounting firm KPMG LLP.

Of the 100 executives surveyed, 77% predicted a recession within a year, while 55% said they were unsure of their bank's future profitability and growth prospects. That likely will not change the executives' desire for mergers and acquisitions, however, with 63% saying they will have a moderate or high appetite for M&A over the next three years. Meanwhile, 31% said M&A is among their organization's top five priorities.

"I think what is at the top of mind is really just the current environment," Peter Torrente, KPMG's national sector leader of banking and capital markets, told S&P Global Market Intelligence in an interview. "This is really a fasten-your-seatbelt situation economically. Inflation is fanning the flames of uncertainty."

Credit risk increasing

The survey's respondents saw credit risk as the biggest threat to growth over the next three years, followed by culture, regulatory action, tax and cybersecurity.

Nearly 60% of those surveyed said they expect the Federal Reserve to raise interest rates every time it meets in 2022, according to KPMG. Slightly fewer, 54%, predicted rates will continue to rise into the first quarter of 2023.

"With the number of interest rate hikes that are expected and being predicted by the executives, there is a point at which credit risk will be increasing," Torrente said.

More than 40% of executives said managing the risks and costs of inflation will be a key challenge.

Just 27% of the executives surveyed said they are confident in the short-term growth prospects of the U.S. economy, while 87% predicted healthy growth in the long term.