Over the last several years, three+one has blogged frequently about the changing landscape of banking and the value of cash as an asset.
Last year at this time, I made a prediction of the top 10 trends for 2018. My batting average edged up over that of 2017, from 70% to 75% in 2018. As we head into 2019, the top 10 trends I see evolving are as follows:
1.) The outlook on cash will continue to be very positive, with cash becoming an even more valuable asset; expect it to be earning 3.0%+ by year-end 2019.
2.) Liquidity analysis and data will become more prevalent and as a standard requirement, given the value cash has become. In 2019, the Financial Accounting Standards Board (FASB) has mandated that all non-profit organizations disclose such information on financial statement. We expect the Governmental Accounting Standards Board (GASB) to follow suit in coming years.
3.) The Federal Reserve will still raise short-term interest rates at a slower pace than in 2018, due to a divided outlook by members of the Fed’s board. The 30-day Treasury bill will reach 3.0% during the year. This will lead to a continual trend of U.S. Treasuries being purchased as an alternative to bank-deposit products.
4.) I do not expect an economic recession in 2019; rather, I believe the nation’s signs of economic growth will continue on a pace of 3.0% or greater. Consumer confidence will remain high, and unemployment at historic lows.
5.) Given the new leadership in the House of Representatives, pressure will mount to have greater oversight of banking, stalling any additional rollbacks of Dodd-Frank. I also foresee calls for banks to set aside additional reserves in case of financial market stresses appear to loom.
6.) Expect the big banks to continue building their presence in large metro areas, with regionals concentrating on mid-tier cities and counties, and community banks on smaller cities and towns. Community bank mergers will continue throughout 2019.
7.) Blockchain and 5G technology will lead the way for greater pressure on entities to upgrade their technology infrastructure.
8.) The average bank Earnings Credit Rate (ECR) will exceed 1.50%.
9.) Given the staggering growth in online purchasing and lower oil prices, prepare for a dip in sales-tax projections. This gap can be made up through the proactive management of “all” cash, generating significant revenue to offset the sales-tax shortfall.
10.) three+one will help public entities and higher Ed institutions earn an additional $100 million+ in new interest earnings, enabling a greater return to those they serve.
At three+one we strive to help clients navigate through the changing landscape of banking and an environment of rising interest rates.
Like 2017, 2018 was a great year for those entities that put our recommendations into practice. Next year promises to be even more rewarding, given the trends we have identified here.
If you don’t know where to start, please call us. If you have benefited from our work, please share the word. We’d like to help more entities like yours make real improvements to their budgets and bottom lines in 2019.
