U.S. Bancorp Chairman and CEO Richard Davis, who this spring will step down from the Minneapolis-based company's top job to pursue a yet-to-be-determined new venture outside of banking, made his best attempt to rally the industry before stepping away.
Delivering the keynote address Jan. 30 at Bank Director's Acquire or Be Acquired conference in Phoenix, Davis said the U.S. economy and the financial system that lubricates it are on the cusp of a major shift, one that could catapult lenders and their customers into a new era of prosperity.
"We are at a moment of significant consequence," Davis said, likening newly minted President Donald Trump and his pro-business agenda to major developments in history, from the first flight to the advent of assembly lines to the iPhone.
Trump's deregulation vows, most recently including an executive order this week that requires the removal of two regulations for each new rule enacted, would directly benefit the banking industry, Davis said, minimizing heavy compliance burdens, lowering costs and freeing up bankers to innovate on behalf of their customers.
The shift that Trump represents, and the optimism that has accompanied it in banking circles, is based on a multi-pronged agenda that Davis said could provide substantial benefits to banks' customers and, ultimately, translate into more lending and financial advisory business. The president's platform includes a push to reform healthcare and curtail costs, lower corporate tax rates, renegotiate trade deals, and boost federal spending on the nation's infrastructure.
"I'm excited about the optimism" on display at the conference, Davis said shortly after several hundred attendees in a cavernous convention hall were surveyed to find that nearly 80% of them believe the Trump presidency will prove a net positive for them.
Davis said bankers should be gearing up to shift from defense to offense, preparing to make efficient adjustments in a coming era of rapid change. As lending and other opportunities mount, banks that can provide customers the products and services they want, via the technology they prefer and without delays will excel. He said community banks, in particular, must make sure now that they are making necessary investments in technology, are in front of cybersecurity threats and can effectively market their customer service strengths.
These banks should also actively study the financial technology space, looking for ideas and partnership opportunities, Davis said. Bank should view fintechs not as unwanted competition but instead as potential complements to bread-and-butter lending.
Often, he said, smaller banks trail big banks on innovation. In the increasingly digital driven environment, customer preferences and demands are evolving too quickly for any bank to find itself playing catch-up to others. "You can't lag it anymore," Davis said.
For all the need to brace for change, for all the optimism heading into 2017, Davis did advise bankers to be patient and not rush into major decisions, including acquisitions, until the country and the industry get a little more clarity on how successfully Trump can govern. He said that while expectations are high, the Trump presidency is young and major legislation on matters such as healthcare and regulatory rollbacks will take time.
"Until we see them, we should still be a bit cautious," he said.
He said U.S. Bancorp's customers are generally optimistic, but for the most part, they have not yet begun to invest in new growth plans. "While it all feels positive, we haven't yet seen the evidence," Davis said.
Others at the conference echoed that tone of optimism tinged with modest caution. Curtis Carpenter, principal and head of investment banking for Sheshunoff & Co., reminded that banks actual growth rates and profitability determine their ultimate value, not Washington. So even if Trump comes through on taxes, deregulation and other promises, bankers still need to make smart decisions in order to fully capitalize.
Some were concerned that perhaps banks and their investors are simply assuming too much about the new order in Washington. After all, Trump's first days in the White House, while exceptionally active, were also chaotic, with discussions around healthcare and taxes overshadowed at times by the president's penchant for lashing out at critics on Twitter, by his controversial executive order to curb immigration from certain countries, and by marches and rallies in cities across the country protesting the new administration.
Chris Nichols, chief strategy officer at Davenport, Fla.-based CenterState Banks Inc., noted that while most bankers are upbeat, many other Americans are unsettled by Trump, and the president will need to bring together Americans and the lawmakers who represent them to succeed with his ambitious plans in Washington.
But all agreed that few things in the nation's capital will remain the same under Trump. As Davis summed it up: "The world's about to change."