From M&A to organic expansion, banks are ready to maximize opportunities for growth
On the heels of a high holiday spending season, economic prospects for 2024 are looking up. According to CBS News, “Although fears of a U.S. recession loomed over much of 2023, a resilient economy surprised forecasters by gaining speed on the strength of robust consumer spending and solid job gains.” Despite consistent rate hikes aimed at cooling inflation – something that often risks recession – it’s looking increasingly likely the economy has achieved the sought-after “soft landing,” according to a new World Bank report. “The risk of a global recession has receded largely because of the strength of the U.S. economy,” says Yahoo News. “It’s showed surprising resilience in 2023.”
In banking, the rising rate environment throughout 2023 had institution’s eyeing expansion, both geographically and demographically, to find new audiences and new opportunities, but not quite ready to act yet. Now at the start of the new year, banks and credit unions seem ready to kick into growth mode. “Savvy banks are viewing challenges as opportunities to better serve their account holders, staying open to innovation and planning their growth strategies,” according to Bank Director. For institutions both large and small, there’s pent up demand for expanding into growth markets through organic expansion or mergers and acquisitions.
“M&A momentum in banking and across industries could mount because of heightening buyer interest as well, an Ernst & Young survey of 320 U.S. CEOs this fall showed,” according to American Banker reporting on the banking sector’s appetite for M&A. “It found 52% of top executives expect to pursue deals in the next year as more companies seek scale, business line diversity, new technology and stronger profits.” Interviewed by American Banker, Palmer Proctor Jr., CEO of Ameris Bancorp in Atlanta predicts a “wave of consolidation.” He says, “There should be a lot of activity taking place, as we look out into next year and into the following year.”
Growth isn’t just a traditional bank priority, either. Credit unions are focused on increasing their influence through their geographic footprint. “Credit union branch building is trending way up,” according to Adrenaline’s Chief Brand Officer, Juliet D’Ambrosio. “Many credit unions are underbranched compared to banks and are seeking to grow new membership and expand into new markets with a smart branching strategy and investment in physical networks.” Credit unions are also increasingly interested in M&A as a path to growth. As reported by Banking Dive, Alabama-based All In Credit Union just announced its purchase of five branches of 22nd State Bank.
On the organic growth side, institutions are looking at widening geographies, like areas rich with middle market opportunities. For example, Canada’s TD is looking to broaden its U.S. reach through serving “institutional clients, such as universities, nonprofits and healthcare systems,” according to Banking Dive. The Toronto-based bank is focusing on Chicago and Atlanta as two cities to gain a greater middle-market share. “The opportunity to expand our coverage and expand our brand awareness in those markets where we’ve demonstrated that we’re subject-matter experts is a big part of our fiscal 2024 plan of growth,” says to Chris Giamo, TD’s head of commercial banking.
Community-based institutions are getting in on the growth game, too. While community banks may be more often associated with smaller towns, “surging population growth brings opportunities for community banks that are positioned to take advantage of it,” according to Independent Banker. Data from the U.S. Census Bureau increasingly finds key growth areas adjacent to larger cities, and the trade publication for community banking spotlights community banks ready for new growth in new markets, like Georgetown, TX, Lehi, UT, Cape Coral, FL and Nampa, ID. “Eager to grow right alongside their cities, community banks took a look at their potential new customers and jumped at the chance to serve them.”
If you’re a banking leader looking for growth strategies customized to your financial institution, get in touch with the experts at Adrenaline. And don’t forget to subscribe to Believe in Banking to stay up to date with the latest news impacting the banking and credit union industries.