Financial executives in Rhode Island and the surrounding regional market point to increasing optimism about the U.S. economy this year, tempered by concern about intensifying competition in banking, as well as among businesses across the board.
That perspective is in line with the findings of TD Bank’s fourth annual CFO Survey, which captures a sampling of the outlook and economic health of companies along the East Coast.
“Both our revenue and expenses are going up year over year,” said People’s Credit Union Chief Financial Officer John Knierim. His perspective mirrors survey findings that about half of the financial executives polled expect to increase capital expenditures due to stronger revenue growth.
Results of the TD Bank CFO Survey, released in early May, showed that 60 percent of 300 financial experts polled, including chief financial officers, comptrollers, treasurers and directors of finance at companies from Maine to Florida, are optimistic about U.S. economic growth this year, compared to 46 percent who were optimistic last year.
What stands out in the survey of East Coast financial executives is that those in southern New England, which includes Massachusetts, Rhode Island and Connecticut, are more concerned with competition than financial leaders in the more northern states, as well as in the mid-Atlantic and the southern states.
Nearly one-third of the southern New England financial experts said their top concern is the competitive environment. That regional concern is on the radar at People’s Credit Union, said Knierim.
“I would say it’s getting more difficult because of the economy still being a little sluggish and the interest-rate environment we’re in. There is some consolidation happening in our industry and some players are getting bigger,” said Knierim. “You have more people going after the same type of customers, so it’s putting compression on pricing where there are a lot of people trying to get into the market.”
Heating up the competition is pressure from a newer source, he said.
“I think the major competitive pressure is from the nonbanks, the nonfinancial institutions,” said Knierim. “Things that were previously done by banks and credit unions are now being done by places [such as] Wal-Mart, which offers their own branded, prepaid debit cards. Some people are getting those and avoiding traditional financial institutions.”
The survey showed that the southern New England region had about one-third of the respondents with a large stockpile of cash and no plans to let it loose this year.
Financial firms and businesses that are making substantial expenditures this year are using much of it for technology, with more than two-thirds of the southern New England companies surveyed planning tech-related spending.
“While we’re seeing companies spending for technology, and some in upgrading facilities, the survey showed less activity in terms of hiring,” said Crandall. “We’re not seeing huge capital investments in expanding the employee base, especially in Rhode Island.”
Among all the financial leaders surveyed in the East Coast companies, about two-thirds said they plan to increase spending for technology, about 40 percent said spending would be on existing facilities and about 40 percent said they intend to spend for workforce hiring. While hiring isn’t at the top of the financial priority list among those polled, the survey showed a nearly 15 percent jump in plans to hire additional workers in 2014 over the previous year.
“At People’s Credit Union, we’re only doing very selective hiring in 2014, in certain key growth areas,” said Knierim. “We are replacing people, but other than that, we’re hiring strategically in some of our consumer lending, especially in automobile lending.”
Spending on technology at People’s Credit Union has been heavy for the past two years and is slowing down a bit this year, he said.
“We spent a lot of money in technology, including a major enhancement of our core computer system and our online banking, and our major effort was done last year,” said Knierim.
“We did a number of hirings after the merger with NewportFed,” said Rheo Brouillard, president of Savings Institute Bank and Trust, which is headquartered in Willimantic, Conn. “We brought in some commercial lenders and some mortgage lenders. We probably anticipate a little more hiring, particularly on the mortgage side.
“We’re putting in a brand-new phone system that allows videoconferencing, so we’re installing new, high-capacity phone lines,” said Brouillard. “Technology is kind of a constant expenditure.
“I think, generally speaking, we do anticipate higher revenues this year,” said Brouillard. “There seems to be more loan demand earlier this year than there was at the tail end of last year. In fact, in the Rhode Island market, since we’re gotten there in September, loan demand has been very good in the NewportFed market area.
“Overall, competition is very tough,” added Brouillard. “I think that’s especially in southern New England, because I don’t think our economy is coming back as strong as in some other parts of the country. Still there’s been some improvement, and as a result, there’s a lot of competition chasing what little business is happening out there – that’s in every business, not just banking.”
At Restaurant City, a Providence-based restaurant equipment and supply superstore, General Manager Michael Friedman said most of the expenditures were done last year to launch the business.
“I think in our specific case, we spent that money in 2013,” said Friedman. “As far as hiring, we have six employees now and will probably add two more in the next six months, as well as the possibility of a couple of part-time people for peak times.
“There is increased competition in the market overall and we’re seeing that in restaurant-equipment industry,” said Friedman. “Some companies that were hit hard by the recession are now branching out and focusing on new markets, and some are going outside their region. New England has a lot of institutional markets, like universities, schools and some corporate cafeterias, so it’s very competitive.” •
