There’s a lot we don’t know about the current environment of combined health and economic crisis. Here are some of the assumptions I am working under:
While I am encouraged by a lifting of restrictions making return to work possible, I expect the pandemic and its accompanying recession to be with us through 2020 and into 2021. Economies can’t be started and stopped like a car. Making up for the loss of momentum, in this case more than a decade of economic growth, will be more like getting a 150-car freight train back up to speed.
Some of the practices adopted for working through the pandemic will become part of a new normal: More work-from-home options, more Zoom meetings, less travel, more remote loan closings, less distinction between traditional work hours and off hours, and more of the regulatory exam process is likely to move off-site.
Many technology-based aspects of service are getting a boost during the pandemic. Customers are getting used to mobile banking, getting used to making deposits by taking a picture of a check, and getting used to choosing the drive-up window over the lobby. It can be hard to teach an old dog new tricks, but once you get them trained, there’s no going back to the old ways.
The commercial real estate business is going to require close scrutiny. Lots of those retail businesses that closed are not going to reopen. Many employees who got comfortable working at home are going to choose to stay there and their employers are going to allow it. That is going to make the strip mall, retail store and traditional office building a little less attractive. How much appetite is there going to be for new buildings? Commercial real estate historically has been one of the banking industry’s best loan prospects. If a significant portion of the commercial real estate market loses value, what sector will emerge to replace it in the typical bank’s lending portfolio?
There is a “hunkering down” mentality among managers in this environment. That’s understandable. Almost no organization can realistically plan for record earnings this year. But let’s not close our minds to the possibility of opportunity. Despite a lack of precedent and a lack of information, you will need to make important decisions in the coming months to navigate this environment. Make the most of what you know, remember the fundamentals and focus on the people. No matter what you face, that recipe generally produces the most palatable result.