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Time To Take Risks
The U.S. is at war with Iran, and Israel has been bombing Lebanon. Oil and gas prices have surged, which could lead to inflation and reduced spending for businesses and consumers. Last week, the chair of the international Financial Stability Board, Andrew Bailey, warned the G20 group of finance ministers and central bank governors about the rising financial risks stemming from the conflict in the Middle East. He specifically warned of multiple shocks materializing simultaneously, mentioning private credit and “stretched asset valuations,” among other risks.
But don’t tell that to banks in the U.S. They’re doing swimmingly. Credit quality overall is still good. Capital levels are high. Total loan growth has soared year over year, growing by 6.5% for nine weeks in a row, according to a mid-April report from Piper Sandler & Co. Total assets in 2025 for the industry grew close to 5% over the prior year, but that was after several slow growth years post Covid-19, according to Bill Herrell, executive vice president and managing director at Bank Director. Now that first quarter earnings calls have begun, there are few signs that banks are pulling back when it comes to growing loans.
In fact, in Bank Director’s 2026 Risk Survey, 53% of respondents said they could take on more strategic risk. “I think it's a rational reaction,” says Herrell, who will moderate a panel on strategic planning at Bank Director’s Bank C-Suite Summit, April 27-28 in Nashville. “The risk globally obviously impacts interest rates for our banking clients. So, they're probably thinking that deposits are not going to get much cheaper in the near term. If my net interest margin isn't expected to increase, what do I have to do to create additional dollars on the margin? What strategies could I deploy?”
Although the survey didn’t ask what strategic risks banks plan to take, Herrell says his conversations with bankers indicate that they’re looking at expanding or adding fee income, private banking or wealth management, and Small Business Administration lending. Other avenues of strategic opportunity include acquisitions and geographic expansion. “If you have a margin that we know is probably not going to increase — [but] we have good capital, we've got good credit — we've got to figure out a way to take on additional strategic risks to obtain the growth we need,” he says.
• Naomi Snyder, editor-in-chief for Bank Director
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