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Source: IntraFi news release

ARLINGTON, Va.-- A staggering 96% of community bank leaders expect a recession to hit within the next 18 months, according to a new survey by IntraFi, a leading fintech that runs the largest bank deposit network.

Bank CEOs, presidents, COOs, and CFOs from 388 unique institutions nationwide were evenly split between those who saw a recession by the end of this year and those who said it would begin sometime in 2023. Roughly half said that if a recession occurs, the primary fault will lie with the Federal Reserve for raising rates too high and too quickly since the beginning of this year.

"Bankers have become less confident in the Fed's ability to curb inflation while guiding the economy to a soft landing," said Mark Jacobsen, CEO and Cofounder of IntraFi. "To a degree greater than reflected in the equity markets today, most banks do not believe the Fed can constrain inflation without triggering a recession."

The Fed has raised interest rates three times so far this year, including a 75-basis-point hike in June, the largest since 1994. Many analysts anticipate the central bank will raise rates by another 75 basis points at its July meeting this week.

In all, 62% of bank leaders surveyed at the end of the second quarter said the Fed is overcorrecting for inflation, 10 percentage points higher than those who said the same in IntraFi's first quarter survey. Another 18% believe the Fed is not raising rates fast and high enough, while 21% said the Fed is on the right track.

While 51% said the primary reason for a recession would be the Fed's overcorrection, another 25% said it would happen due to ongoing supply chain problems. Sixteen percent cited other issues, including a combination of factors.

Banks have also been impacted by the current tight labor market and the so-called "Great Resignation," which has seen workers retiring early or otherwise leaving the workforce. Sixty percent of bankers responded that they have had difficulty in finding employees who are qualified for open positions.

While the top strategy to address this issue has been higher compensation (66%), less than a third of banks have utilized flexible and remote work options to attract and retain employees (31%). Almost 60% of bank leaders said remote work is not an option at their financial institution for any positions, either senior or lower level. Only 21% said remote workers are a viable option for any position, while 15% said it's an option for mid- or lower-level jobs.

Bankers are anticipating-or already experiencing-other challenges, too. The number of bankers who predicted deposit competition will tighten in the year ahead jumped 46 points, to 77%, compared to the second quarter survey of 2021. Meanwhile, 54% of bankers are seeing higher funding costs, an increase of 49 percentage points from the same point last year.

Almost half of bankers predicted loan demand will decline next year, a jump of 22 points from the first quarter survey. More than three quarters of banks said they have experienced no change in access to capital, with 67% anticipating it will stay the same over the next 12 months.

This survey was conducted online over the course of two weeks from June 21 to June 30.

To read the report in its entirety click here.

About IntraFi

Chosen by thousands of banks since its founding more than two decades ago, IntraFi has assembled the nation's largest bank deposit network. Its solutions connect financial institutions of all sizes to help each build stronger relationships with its customers, fund more loans, seamlessly manage liquidity needs, and earn fee income. As the nation's #1 provider of reciprocal deposits solutions and a leading provider of overnight and term funding options, IntraFi has the scale to be a strategic partner for even the largest bank's funding and capital management needs, or for the smallest.

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