CHICAGO – More bankers are confident in their ability to woo potential business customers and many of them are beefing up their products and services to get them in the door. According to the new Grant Thornton’s Thirteenth Annual Survey of Bank Executives, three-fourths (75%) are planning to offer cash management services in the next three years, up from 59% now. Almost two-thirds (62%) say they are likely to offer corporate/business credit cards in three years, up from just over half (53%) today. Approximately half (48%) of all bankers would also like to offer remote deposits in three years; up from 18% who do so today. In other areas, banks are looking ahead to serve the “echo boomers” with education funding, the survey noted. While approximately half of the banks now offer education IRAs (49%) and a third (34%) offer access to 529 college savings plans, just under two-thirds (63%) say they are planning to offer education IRAs and almost half (46%) would like to offer access to 529 plans within three years. More than 330 CEOs and senior officers of banks and savings institutions with assets in excess of $100 million responded to the survey. Once again bankers most often identified retaining deposits, retaining key employees and attracting new business as the three elements important to their success; however, the number expressing confidence in their ability to achieve their goals has declined since last year, according to the survey. While almost all bankers (96%) identify retaining deposits as critical to their bank’s success, only half (51%) feel comfortable or confident about their ability to do so. This is a significant drop in confidence levels from the previous year, when two-thirds (66%) reported they were confident in their bank’s ability to retain deposits, the survey noted. “Bankers face a wide spectrum of businesses that are fighting for these deposits,” said John Ziegelbauer, Grant Thornton’s national managing partner of the financial institutions practice. “Other banks, credit unions, brokerage firms, mutual fund companies and Internet banks are all looking to capture the same depositor dollars.” Although more than nine in 10 (95%) bankers agree that attracting new business customers is a key success factor, a much smaller percentage feel confident in their ability to do so. Just over half (52%) say they are confident in their ability to attract commercial customers in 2006, while 61% felt that way last year. “Despite their concern about retaining core deposits, few bankers plan to change their tactics for funding growth,” said Ziegelbauer. Nine in 10 bankers report that they used earnings to fund growth in 2005, and a comparable percentage (88%) plan to continue to fund growth through earnings over the next three years. Federal Home Loan Bank advances continue to be an important source of funding for almost three-fourths (73%) of all bankers; while three in 10 bankers (30%) used brokered deposits in 2005 and four in 10 (39%) expect to do so in 2006 and over the next three years. “A look at the products and services bankers plan to offer within the next three years shows more interest in variations on, and new delivery systems for, traditional banking services than in major expansions into new lines of business,” said Ziegelbauer. Banks have added a wide range of electronic services over the past several years, and this continues to be an area of anticipated growth for many banks, especially in the area of payment services, according to the survey. While four out of five banks (80%) already offer electronic bill payment, bankers estimate this will climb to 94% within three years. Bankers also are still interested in delivering electronic bills to their customers. Today, only 16% are actually doing so, but four in 10 (39%) would like to do so in three years. “New services reflect the changing demographics of bank customers and banks’ are adopting new strategies for retaining core deposits,” said Ziegelbauer. “The first baby boomers will turn 65 in 2011, and by 2030, one in five Americans is expected to be 65 or older. Add the trend toward increased equity ownership, and it’s hardly surprising that more than half of the bankers expect to offer brokerage services (61%) and half will offer mutual funds (50%) in the next three years.” One-quarter (23%) of all bankers are looking at offering reverse mortgages in three years, up from 13% whose banks do so today. Health savings accounts (HSA) may also become more widely available through banks, with 64% of executives reporting that their banks plan to offer HSAs within three years. -

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