December 25, 2017
Economic Forecast 2018

As the banking industry consolidates, loans will increase

Chris Foley, senior vice president of UniBank, stands in the new style of bank branches.

With the American economy humming along at a steady rate – with job rates, household spending and consumer confidence all up – financial institutions lent more in 2017 than at any year since before the Great Recession, according to the Federal Reserve.

In Massachusetts, banks loaned nearly $100 billion in the third quarter of 2017, a jump of $7.7 billion, or 8 percent, over the same period in 2016, according to the Federal Deposit Insurance Corp.

That lending is up nearly $35 billion, or 54 percent, in just five years.

Consolidation that's sure to come

With so many small banks still dotting the area, it's only a matter of time when more of them join, as several did in 2017, or are bought out by a larger competitor.

In 1987, there were 13,723 banking institutions nationally, according to the FDIC. By 2016, it was down about two-thirds, to 5,112.

Continued low-interest rates

Interest rates have been projected to inch upward all year, but mostly stayed pat at a lower level than had been seen in decades until the Great Recession.

Avidia Bank in Framingham.

In mid-December, the Fed raised the federal funds rate to a range of 1.25 to 1.5 percent, on strengthening job numbers and increased household spending. But the benchmark borrowing rate remains far below historic levels.

While rates have risen slower than expected, the Fed said it expects rates to rise further in 2018.

Stronger focus on in-branch experiences

Despite a smaller number of financial institutions than in the past, the number of branches keep rising.

Why? Because banks say they still want to be close to their customers, even if so much more of banking now is done online.

While people can deposit checks with a scan of their phone and pay off a credit card with a few taps, banks have repositioned their branches to be more informal and to focus on helping customers with other needs, such as questions about loans or refinancing.


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