Banking & Finance industry outlook.

• Position: Industry Outlook - Industry Overview

In a climate of economic uncertainty, the members of Utah's business community are counting on well-seasoned industry experts to provide sound financial guidance. In early February, with Olympic anticipation reaching a fever pitch outside, six financial gurus assembled with Utah Business magazine staff in the downtown boardroom of Ernst & Young to discuss business banking and finance.

Jim Schallheim, professor of finance and Gain professor at the University of Utah, moderated the third of our ongoing Industry Outlook round-table discussions. Participants included James C. Anderson, president at Bank of Utah; Bruce D. Ashcroft, regional manager and senior vice president at Washington Mutual; John B. D'Arcy, executive vice president at Zions Bank; Mark D. Howell, executive vice president and division manager at Wells Fargo; and Eric J. Schmutz, executive vice president at State Bank of Southern Utah.

Thanks to these six men who aren't afraid to put their money where their mouth is, a great deal of useful information was gathered and compiled. Their fast-paced conversation touched on a variety of topics, from venture capital to collateral, job creation to the importance of technology in banking today. As one participant pointed out, "There's a lot of interesting challenges in banking in the future." We couldn't agree more.

ANDERSON: Because of the slowness, there is a lot of money available, so if people have good projects and it makes sense, there's a lot of money to lend and they can have very good rates. I would certainly not describe it as a tight credit situation.

HOWELL: There are deals that would have been done three or four years ago that are not getting done today. Our focus has been to be consistent on the lending gamut between good times and bad times. By looking at the general financial statements of our customers, I'm seeing some weakness. They're not seeing the steady growth they had in the past. Luckily, we haven't seen some of the real fallouts or train wrecks that we saw back in the mid '80s, and one of the things affected is interest rates. Interest rates weren't this low since I was in the fourth grade. Our customers' cost of borrowing is substantially less and so that has ameliorated some of the effects of the economy. We just hope we can move it on.

Do you notice differences between the national economy and Utahs economy? Does that play any role in what's going on with local venues?

ANDERSON: In our institution, we feel that Utah's economy is excellent, and we've got a lot of good, strong situations. We do have some weakening in a number of our customers, but we feel fairly confident about what's happening in Utah and what will happen.

ASHCROFT: I attended the Risk Management Association National Conference, and it was surprising to me how similar each of the states are in their economies. I was surprised at how much the whole national economy comes together when some aspect or state is affected. Overall, it sure seems that the whole nation is headed in the same arena as far as the economy.

D'ARCY: There's plenty of money available, but the banks are being a little bit more cautious and their underwriting standards have tightened up a bit, and most businesses are not as aggressive today as they may have been a year or two years ago. They are saying, "We're still interested in this project, but not right now." It's really a combination of the banks being a little more cautious as well as the customers being a little more cautious.

SCHMUTZ: There are excess funds and people are more conservative. They're willing to leave their money in the bank, so their deposits and funding alone aren't the problem, but we're more conservative in underwriting alone.

What changes do you see in the competition, or from global banks or foreign banks, etc.? What rules are playing in the current economy?

HOWELL: Our experience, both locally and across our market, is that when the market is tough for the foreign banks, they evaporate, so you see fewer foreign banks in transactions. And so if you're trying to do a syndicated deal, it is difficult to market because if you look at the total syndicated relationship, more of those assets are classified nationally than non-syndicated deals, and so the regulators are more concerned about that.

D'ARCY: You have to understand where the foreign banks played. They didn't really play in the middle market or...