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For the first time since Q1 2017, a composite outlook of bank CEOs, presidents, and CFOs from across the United States suggests that there is more optimism about the banking industry, as well as overall economic conditions.

This according to Promontory Interfinancial Network's proprietary Bank Confidence Index (SM), which is back in positive territory with a 2.4-point improvement (to 50.5, crossing from contractionary to expansionary territory) over last quarter. This is the highest rating for the Bank Confidence Index since Q2 of 2016.

The Bank Confidence Index, which is calculated using the results of Promontory Interfinancial Network's Bank Executive Business Outlook Survey, tracks banker expectations in four key areas: access to capital, loan demand, funding costs, and deposit competition. (Charted on a scale of 0-100, a score over 50 can be read as expansionary.) The Q4 2017 survey is the twelfth published by Promontory Interfinancial Network with data released every fiscal quarter.

In general, respondents showed growing enthusiasm for the economy, with 63 percent saying economic conditions had improved for their bank today compared to 12 months ago and only 5 percent saying things had gotten worse. By contrast, those numbers were 49 percent "improved" and 9 percent "worse" last quarter—meaning that for this quarter there was an 18-point gain in net favorability on that measure. Looking to the future, this survey shows bankers are even more optimistic about how the economy will impact their bank. Sixty-five percent said their situation will improve, and only 5 percent said it will get worse. Those numbers were 45 percent "improved" and 10 percent "worse" last quarter—a significant 25-point increase in net expectations.

"Bankers are feeling more positive about the future than they have in the last 18 months," says Mark Jacobsen, president and CEO of Promontory Interfinancial Network. "This optimism is good for the industry and for the economy, especially given that community banks play such a critical role in lending and job creation, and could counter the impact of higher interest rates."

This quarter's survey also examined how bankers plan to use the money saved from the enactment of the Republican tax cut legislation. A majority of bank executives (51 percent) say they intend to use the money saved to invest in their business, while the second most popular option (40 percent) was to increase wages for employees (notably ahead of paying higher dividends and/or buying back stock). Executives were also asked which regulatory change would make the biggest positive impact for their bank; two-thirds (67 percent) said they wanted a regulatory approach based on the size and complexity of firms being regulated.

Respondents were also asked whether they would credit the former or the current White House administration for 2017's strong economy. Forty percent of respondents gave the Trump administration a lot of credit, compared to just 5 percent who chose the former Obama administration. Overall, 83 percent of respondents believed that the Trump administration deserved at least some credit for the 2017 economy, while only 27 percent said the same about the Obama administration. (On a 0 to 10 scale, Trump's White House earned a mean score of 6.55 on this economic "credit test," while Obama's administration garnered a 2.81).

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