Wisconsin bank consolidations on the rise

Wisconsin bank consolidations are on the rise, with more than double the number occurring in 2016 than in 2014.

Rose Oswald Poels, president and CEO of the Wisconsin Bankers Association, says that trend won’t continue.

While 21 mergers and acquisitions occurred in 2016, only 12 occurred last year, and nine the year before that. While the upward trend in the past few years is clear, Poels says it will slow, and already has begun to do so.

According to her, consolidation was “much slower” in fall of 2016 compared to the rest of the year. She acknowledges that mergers and acquisitions such as these will continue, but sees them doing so at a reduced rate.

The recent increase in consolidations can be traced to rising bank expenses, says Poels. Both regulatory costs and technology costs are steadily increasing, while bank consumers expect more easy access to their information.

“A lot of that tech, and the security around that tech, costs quite a bit of money,” Poels said, adding that Dodd-Frank, a consumer protection act passed in 2010, was another drag on banks.

According to her, the Obama administration “swung the pendulum too far,” putting financial strain on banks and consumers alike.

Under President-elect Trump, Poels expects some changes to Dodd-Frank to lessen the “extreme” regulatory burden that hampers banks’ ability to do their jobs.

Despite these challenges facing the banking industry, Poels sees strength there as well, and spoke to that at the Wisconsin Economic Forecast Luncheon in Madison on Thursday.

“This past year, Wisconsin banks continue to exemplify the confidence that many have in the improvement of the economy, with third quarter FDIC numbers showing stable, steady growth of our industry,” Poels said. “There is every indication that the strong bank performance we saw last year will continue in 2017.”

Lending in 2016 grew to over $76 billion, according to Poels, which is 4.6 percent higher than in the same timeframe last year.

“Wisconsin’s healthy, diverse banks provide a solid foundation upon which our economy will continue to grow,” she said.

Anthony Chan, chief economist for JPMorgan & Chase, was the keynote speaker for the event, and painted a positive picture for the U.S. economy in the coming years.

“The U.S. economy is doing well,” said Chan. “With all this fiscal stimulus that’s coming, I strongly believe that we are going to see another great year in 2017 with fast economic growth of 2.2 percent, a significant improvement from 1.6 percent.”

David Locke, CEO of McFarland State Bank, asked Gov. Scott Walker about the recent consolidation trend at the luncheon.

Walker responded by saying more than 97 percent of Wisconsin banks are strong despite these consolidations, but pointed to “changes made in Washington” as having negative impacts on rural parts of the state and small community banks in particular.

“When I look at the key to the future of communities like the one I grew up in, it’s community banks helping small businesses,” Walker said. “When you think of startups, opportunities, overwhelmingly it’s going to happen in those areas because of community banks.”

Chan added that “we are going to see much higher banking profits in the next couple years” as a result of lowered regulations and corporate taxes.

–By Alex Moe