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Adina Genn//May 10, 2023
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CEOs concerned about banking crisis
AP Photo/Matt Slocum
Adina Genn//May 10, 2023
The current banking crisis has chief executives concerned, but not enough to switch institutions. That’s according to the latest Marcum LLP-Hofstra University CEO survey, which was released Tuesday.
“In light of recent events, mid-market CEOs show increasing concern for banking partner stability, yet the majority maintain their relationships, reflecting trust in financial institutions,” Jeffrey Weiner, Marcum’s chairman and CEO said in a statement. “Though CEO optimism persists across industries, their strategic planning is being shaped by economic uncertainty, talent scarcity, and escalating costs.”
The Marcum-Hofstra CEO Survey, developed and conducted by Hofstra’s Frank G. Zarb School of Business, is a periodic gauge of mid-market CEOs’ outlook and priorities for the next 12 months. The survey polls the leaders of companies with revenues ranging from $5 million to $1 billion-plus. This latest survey was conducted the week of April 10, 2023 and polled 255 mid-market CEOs.
Janet Lenaghan, dean of the Zarb School, said that the last few years prepared CEOs to manage uncertainty like the volatility in the banking industry.
“CEOs have had to juggle multiple challenges that emerge and evolve faster than ever before,” Lenaghan said in a statement. “In a sense, they’ve been in crisis management mode since the COVID-19 pandemic hit, so they know how to live with unpredictable conditions, when to be nimble and when to stay the course.”
The survey was published less than a month after the failure or federal rescue of three regional banks. In the survey, mid-market CEOs expressed “uncertainty about the implications of the bank collapses and how to respond,” according to a news release about the findings. For instance, 62.4% said that they are either somewhat or very concerned over the stability of their company’s bank. Still, 87.8% said that they planned to continue the banking relationship with that institution.
In addition, the percentage of CEOs who expressed concern over the stability of their company’s bank was virtually the same whether the company worked with a large national bank or a smaller regional institution.
The survey revealed that to date, fears over a larger banking crisis have not impacted most of the respondents’ outlook on the business environment. In the survey, 82.5% rated their outlook as 5 or higher. That business outlook remained “virtually unchanged from the last survey in February,” according to the news release.
There are, however, “stark differences in outlook” when the survey is broken down by industry. These findings point to growing concerns over whether the banking collapses may cause a commercial real estate crash. For example, 45% of real estate executives polled in the February survey were strongly optimistic about their business outlooks, providing ratings of between 8 and 10. Yet only 11% expressed that same outlook in April, according to the survey.
Yet, in a more hopeful sign, over that same period, the percentage of manufacturing and distribution CEOs who reported having a very optimistic business outlook jumped from 27% to 45%.
The survey is analyzed by Zarb School MBA students, led by Andrew Forman, associate professor of international business and marketing, in partnership with Marcum.
“With growing uncertainty in the banking sector, the Marcum-Hofstra CEO survey provides students with an instructive lesson on the importance of corporate leaders remaining vigilant and continually assessing even their company’s most long-standing relationships,” Forman said in a statement. “Similarly, we see them considering their employees’ evolving preferences regarding remote work and balancing these with the organization’s good.
The survey also found that about 27% of CEOs reported that they’ve found it more difficult to borrow from lending institutions over the past year. Still, 40% did not, and almost 33% have not attempted to borrow in the past 12 months.
Economic concerns continue to be the most-cited influence on business planning, with 58% of CEOs reporting it as one of their top three concerns. Behind that was the availability of talent and rising material and operational costs due to inflation.
And about 45% of CEOs reported they permit their employees to work remotely and will continue to do so. Almost 13% said they have discontinued this option, while about 29% are considering that.
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