Financial Industry on Solid Footing as Banks Seek New Growth

Financial institutions ease defensive posture heading into 2024 and get ready for new opportunities from open banking  

The resilience of the U.S. economy continues to bolster the financial services sector. From big banks to regional and community institutions, the banking industry has stayed on solid footing, with better than expected third-quarter earnings and rising revenue. Exceeding analyst expectations, JPMorgan shares rose 1.5%, while Wells Fargo rose 3.1% in the third quarter. Citigroup’s revenue rose by 9% and net income rose 2% year over year. “Higher interest rates are making their loans more profitable, according to the Wall Street Journal. “Consumers and the economy remain surprisingly strong even in the face of the Federal Reserve’s rate increases.” 

With the economy continuing to beat forecasting, institutions are in a good position lean into growth opportunities. Take Huntington Bank, for example. Steve Steinour, the regional bank’s chairman and CEO said on a recent earnings call that Huntington won’t play defense heading into 2024. “Huntington is switching to growth mode at a time when its customer base is exhibiting what Steinour calls ‘underlying strength,’” according to American Banker. “There are moments to take advantage, and this is one of them.” The bank plans to add commercial bankers, expand wealth management, rightsize its branch network, and continue investing in digital banking.  

Another emergent area for U.S. banks is open banking, something Canadian banks have already been leading on. The recently proposed rule would give U.S. consumers more control over their banking data. While some banks brace for attrition and regulatory red tape, others are getting ready to go head to head with big banks. “You cannot look at open banking as a compliance burden only – you have to look at it as a business opportunity, too,” said Rohit Chopra, Director of Consumer Financial Protection Bureau, at the National Bankers Association conference. “The more you focus on what the business opportunity is, the more you can steal the lunch of your bigger competitors.” 

For consumers, the accessibility and portability of data from open banking will empower them to comparison shop and switch primary financial relationships, if they want to. That portability can also allow competitor institutions to provide uniquely tailored solutions for people. “You can use that information to offer new and different products,” Chopra said. “I actually think open banking will allow many of you to offer lines of credit that will take away from the credit card industry at better rates.” This competition will jumpstart innovation, according to an analysis in BankThink. “The flow of data will enable new technology platforms to create a host of new pro-consumer services.” 

If you’re a banking leader looking for brand, marketing and experience 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.