Commerce Bank officials predict consolidation in the industry
BY LAURIE WINSLOW World Staff Writer
Thursday, February 14, 2013
2/14/13 at 7:43 AM
Consolidation should become more common over the next several years within the banking industry, predicts one bank executive.
Over the next five to seven years, David Kemper, the chairman and CEO of Commerce Bancshares Inc., looks for consolidation to become more prevalent, especially among smaller banks that haven't diversified and have $1 billion to $2 billion in assets.
On Wednesday, Kemper joined colleague Scott Colbert, the bank company's chief economist, for an overview of the banking industry and economy. Their joint presentation was given during a luncheon at Southern Hills Country Club for current and prospective Commerce Bank clients.
The Missouri-based lender, which has branches in Oklahoma, has more than $22 billion in assets. It entered the Tulsa market in 2007 when it merged with Bank South.
Commerce Bank serves customers in more than 200 branches in Missouri, Kansas, Illinois, Oklahoma and Colorado, as well as commercial offices in Cincinnati, Dallas and Nashville, Tenn.
It's been four years since the financial crash, and the banking industry slowly has been recovering, especially making progress in the last two years, Kemper said.
One of the unintended consequences is that regulations punishing Wall Street have hurt mainstream banks by resulting in the biggest price control in history, Kemper said. It's difficult for banks to make money, especially at the lower end of the spectrum, he said.
Today, fewer than 7,000 banks exist compared to 18,000 in 1984. Kemper noted that there has been a growth in large banks with a concentration of assets, which is a concern. Several years ago there was no such thing as a $1 trillion bank, he said.
Kemper also looks for the number of branches, which peaked at 98,000 three years ago, to continue declining by 30 percent to 40 percent over the next five to 10 years as the Internet and electronic payments make branches less necessary.
Colbert said that from an economic standpoint, the United States is making some progress.
The country still has 3 million fewer workers than it had at the peak in January 2008, and that number doesn't include all the new people, including college graduates, who have come into the labor force.
Colbert noted that the country has created about 147,000 jobs per month for 34 consecutive months, and its unemployment rate has dropped from 10 percent to 8 percent.
The economy is in pretty good shape, he said. If you travel around the world, however, there is still a healthy degree of pessimism and skepticism about growth prospects, but the Federal Reserve has dropped interest rates to nearly zero percent to save the economy, Colbert said.
"We really have put our financial house, particularly the private sector in this country, in order," Colbert said.
Three walls of this financial house - consumers, corporate America and the financial sector - have taken steps to rebuild their foundation and handle debt, he said, however, "The federal government in no way, shape or form yet has begun to address the debt problem in any material or serious manner. Three-fourths of the real economy have taken care of business."
Colbert noted that debt service for the average household is at a record low. It's easier for the average household to service debt than it ever has been because of the Federal Reserve's engineering of this ultra-low interest rate policy, he said.
A worldwide recession occurred in 2009. While global growth eventually bounced back about 5 percent, it's slowly been fading with Europe dipping back into recession and the U.S. economic growth stumbling along at about a 2 percent growth rate, Colbert said.
Going forward, however, Colbert said he is "fairly optimistic."
About a year ago, countries started lowering their interest rates, including China, Great Britain, the Eurozone and Canada, which should add stimulus to the global economy.
Original Print Headline: Bankers predict rise in mergers for sector
Laurie Winslow 918-581-8466
David Kemper speaks during the Banking Industry & Economic Outlook Luncheon at Southern Hills Country Club on Wednesday. Commerce Bank hosted the luncheon. MIKE SIMONS / Tulsa World