Colorado’s banking sector is improving, but it will likely shrink in 2012, as consolidation continues and some banks fail, local bankers and industry analysts say.
Bank analyst Larry Martin, CEO of Denver-based Bank Strategies LLC, said Colorado’s banking sector could shrink anywhere from 30 to 40 percent within the next few years. Smaller banks — those with assets under $100 million — will find it increasingly difficult to raise capital and pay increased compliance costs under the new federal regulatory environment. So some are looking to either merge with or be acquired by another bank.
Another reason for the shrinking bank sector is outright bank failures. Six banks failed in Colorado in 2011, and although most banks in the state are healthier than they were two years ago, a handful are still struggling and may fail.
A shrinking sector will mean fewer financing options for business owners. But the competition among banks to make loans is so fierce; businesses with good credit will continue to get great rates for the foreseeable future.
Fierce loan competition will challenge many banks this year. “If you’re a strong company with a strong balance sheet, now is the time to get a loan,” Jon Robinson, CEO of UMB Bank Colorado said. “Those companies will get very good terms. The banking industry has a strong appetite to put earning assets — that would be loans — on their books.”
Big banks operating in Colorado, such as San Francisco-based Wells Fargo & Co. (NYSE: WFC) and New York-based JPMorgan Chase (NYSE: JPM), will be in the mix, fighting for local loan business.
They also will be dealing with increased federal regulations and scrutiny, as well as public anger over the financial crisis and struggling U.S. economy.
Excerpt from – Heather Draper Denver Business Journal