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Tag: Banking

Half Full or Half Empty? Denver Business Owners Split on Optimism

With concerns around inflation and the beginning stages of a recession, a new survey of small and mid-sized business owners conducted by PNC reveals about half are optimistic about the economy or near-term future of their business.

With such an even split, it’s hard not to think of the adage, is that glass half full or half empty?

READ — What Does a Recession Mean for Your Finances?

ColoradoBiz took a look at the findings in PNC’s recent Economic Outlook, a survey seeking to measure confidence in the Denver metro economy by capturing business owners’ attitudes and sentiments on a variety of topics including the economy, hiring, regulatory environment and technology and how business owners think they’ll ride out inflationary pressures, supply chain disruptions and political and geopolitical uncertainties related to the national and local economies.

Overall, the results showed that Denver business leaders expectations about their own companies remain strong, with half feeling highly optimistic, similar to the national survey (49%), while the share of those feeling pessimistic is just 2% compared to 7% among business leaders nationally. Nearly two in 10 (18%) Denver business leaders are highly optimistic about the national economy compared with 22% among business leaders nationally. Six in 10 (61%) are moderately optimistic while two in 10 (21%) Denver leaders are pessimistic.

The findings are broken down into distinctive categories: price hikes and coping with inflation; supply chain disruptions; staff shortages; raises/employee compensation; recessionary fears, and consumer prices. PNC rotates major cities in this bi-annual effort and surveyed Denver last in Spring of 2021.

READ — PNC CO Regional President Guest Commentary: The War on Talent

Key Findings from PNC:

  • Concerns about inflation and the impact of price hikes on their businesses remain top of mind among Denver executives. Price increases are in the works among nearly six in 10 (59%) Denver businesses compared to 63% nationally. Of Denver businesses expecting to raise their own prices to their customers, more than a third (34% vs. 36% nationally) expect to raise them by 5% or more in the next six months.
  • The primary rationale for price hikes is favorable market conditions (56% vs. 44% nationally) and keeping up with rising non-labor costs (32% vs. 38% nationally). Just over one in 10 (12% vs. 18% nationally) point to rising labor costs. Price pressures on their businesses, and elevated supplier costs and capital spending also are factors.
  • In addition to increasing prices for their own goods and services, over seven in 10 (72%) have indicated they are making other adjustments to address higher inflation, including increasing efficiency, cutting costs and managing cash flow.
  • Supply chain disruptions continue to be a concern for Denver business owners and have affected four in 10 of those relying on a supply chain, compared to 47% nationally.
  • Less than two in 10 (16%) relying on inventory in their supply chain are coming up short. Denver owners remain hopeful: nearly half (48%) expect supply chain timeliness to improve in the next six months.
  • Over four in 10 (44%) Denver businesses face staff shortages, compared to 41% nationally, and hiring continues to be a challenge for many.
  • A third of Denver business leaders expect to increase employee compensation, compared to 40% nationally. More than one in 10 (14%) Denver business owners or leaders expect to continue or increase signing, retention or other bonuses in the next six months compared to more than two in 10 (23%) nationally.
  • Denver business owners are expressing concerns that a recession is on the horizon. Almost two-thirds (65%) fear a recession is likely in the next 12 months compared to 69% nationally. Three in 10 (29% vs. 30% nationally) believe the likelihood of a recession in the next 12 months is very likely.
  • Aside from any pricing changes they expect to make in their own businesses, four in 10 (39%) of all Denver owners expect to see consumer prices in the economy, overall, increase by 5% or more in the next 12 months. This price change expectation compares to 36% of owners nationally who expect an increase of 5% or more.

 

Along with its findings, PNC senior analyst Kurt Ranking included the following commentary to summarize the findings.

Denver’s economy has performed well in recovery after the pandemic induced recession. The market’s labor force is 4% above its pre pandemic level, compared to essentially no change for the nation.  According to PNC’s Economic Outlook Survey, Denver’s small and mid-sized business owners intend to raise prices for their goods and services to a degree similar to that expected across the U.S.

The root of those price hikes is confidence in the regional economy’s capacity to absorb the increases, which is higher than the national findings (56% vs. 44%), rather than higher labor costs. Denver’s economy is positioned to ride out the remainder of the current inflationary tide and has enough labor market strength to rebound relatively well after any broader slowdown in the U.S. economy.

Denver’s households are well positioned to help the local market’s economy navigate near term economic volatility. Wage growth in Denver has nearly kept pace with inflation throughout the past 18 months, allowing consumers to better afford the higher prices that have affected all facets of their household budgets.

The upside to this is that Denver households have accumulated less debt and depleted less of their savings than in many parts of the nation where wage growth has not matched consumer price growth. If the U.S. economy slows in 2023, the relatively stronger consumer balance sheets in the region will provide more cushion to fall back on, and thus should require less consumer pullback and less of a slowing in job growth as a result.

 

For more information visit PNC’s Economic Reports page where their economists provide analyses and forecasts of national, regional and global economic & financial trends.

How to Know When It’s Time to Switch Banks

Whether it’s a major life change, a shift in your financial goals, a move across country or something else, switching banks can oftentimes be a necessary occurrence throughout a person’s lifetime. Let’s explore some of these life changes and turning points to recognize if and when it’s time to switch banking partners.

You’ve experienced a recent life change

One of the main factors we see when people change banks is because of a recent life change. Some of the more frequent life changes we see that can impact a banking relationship include:

Getting married

If you and your partner bank at different places and want to combine finances, you may want to move to one preferred bank to streamline finances or find a new one altogether.

Death in the family

A death in the family could impact your financial needs and force you to switch banks simply based on the situation at hand.

Divorce

Oftentimes during divorce, finances are top of mind for couples who now need to separate their finances.

READ — Should I Keep the House in the Divorce?

Growing up

You likely banked where your parents did early on in your banking journey, so simply maturing and understanding your own banking wants and needs could impact a switch.

Inheritance

If you receive a large sum of money from a loved one that has those finances at one institution, it may be easier to switch your personal finances to that institution, versus opting for a financial transfer.

You’ve moved or switched jobs

The location of your bank is oftentimes the first factor you look for when finding your bank or deciding to switch banks. Whether you’ve switched jobs, moved down the street or to a different city entirely, moving can prompt you to look for a new financial institution. People typically don’t want to spend time commuting to their bank’s branch or ATM for in-person transactions. With the advent of online and mobile banking, this has become less of an issue for many.

You’ve had a negative customer service experience

Not surprisingly, a bad customer service experience could be a major reason a person decides to move banks. Customer service and a quality experience is critical to building trust and creating customer satisfaction and loyalty. Often, people will leave because of people. If a person’s bank has had a significant amount of turnover or has made errors, they might grow mistrustful. Alternatively, a good customer experience can be great for retention and loyalty and can also help drive positive word of mouth and customer referrals for their friends and family.

You’re shopping for the best rates and offers

If you’re looking to make a large purchase or are considering switching banks, shopping for rates and new product offers is a great place to start. Different financial institutions have access to various loan rates and leverage marketing to grab customers attention. If a bank’s branch and its products and services match what you’re looking for, an added incentive or offer could be the reason you join as a new customer.

With more than 4,000 banks in the U.S., there is no shortage of banks. However, each bank offers something different based on size, location, products and services, customer experience, offers and more, which means it is important to be thoughtful about who you select as your partner. And while certain life changes can force someone to switch banks, ensuring your bank is providing quality customer service and competitive offers can help make that decision clearer.

What upcoming FICO score changes mean for you

There has been a lot of buzz surrounding the upcoming changes to the FICO models or “scores,” which are expected to be made this summer, and how they will impact consumers. Many headlines make it seem as though nearly everyone’s score will go down and it will become more difficult to secure credit. However, this isn’t necessarily the case. Here are the top four things you need to know about FICO and credit scoring in general.

What goes into your FICO score

Today, your FICO score is based on several elements:

  • 35% comes from how often you make on-time payments, and how frequently you’re late.
  • 30% comes from credit utilization, which is the percentage of credit you’re using that’s available to you. In general, the FICO formula prefers to not see you using all of your available credit.
  • 15% comes from the age of your credit history – i.e. how long your credit accounts have been open.
  • 10% comes from your credit mix. This refers to the types of credit you have, whether it’s bank-issued cards, auto loans, mortgages, etc. The FICO formula generally likes to see a mix of credit, and not one specific type.
  • 10% comes from how much new credit you have or have inquired about. If you suddenly have begun opening several new credit lines, this could be a red flag.

The new version is more like a movie than a snapshot

The newest FICO release, called 10-T (the T standing for trended data), can be thought of as capturing your credit usage more like a short movie than a snapshot in time, which gives lenders a more complete picture of your credit history.

This can be advantageous for some. For example, say you use the majority of credit available to you each month, but pay it all off the day it’s due on the 5th of the following month. If you applied for credit on the 30th of any given month, an older version of FICO might flag up that you use most of your credit without noting that you pay it off in full every cycle, as it only pulls data from the day you submit your application.

FICO 10-T, however, looks back to the past 24 months of activity, and will see that you responsibly pay off your debts each month – which will be advantageous as your lender considers your application.

On the flip side, if you’ve continuously consolidated your debts into a personal loan through fintechs or a similar service, FICO 10-T will see this too, and this could make obtaining credit somewhat more challenging. FICO 10-T also examines some factors that help it predict upcoming changes in financial situation, such as when student loan payments might start becoming due or increase.

Not all lenders use the same FICO release

Just because there is a new FICO scoring system set to be released soon doesn’t mean that all lenders will adopt it right away – or at all. The most current FICO system release is version nine, and while some lenders operate using that system, others still use older versions. There are no mandatory guidelines as to which version lenders must use, so don’t automatically assume that lenders will be using the most up-to-date version.

Not all lenders use FICO

There are other alternatives to FICO scores, such as VantageScore, which is becoming a more popular measurement tool for lenders when evaluating applicants’ credit. VantageScore is a model that was developed by the three primary credit bureaus (Trans Union, Experian, and Equifax). VantageScore 4.0, which is the most current score on the market was released in 2019 and already contained trended data technology.

There are some notable differences between the two, however. VantageScore only requires as little as one month of credit history to develop a score, compared to FICO, which requires at least six months of credit history with recent activity. In addition, VantageScore considers data such as rent, utility and phone billing information if that information is already contained in your credit report to help develop a credit profile for applicants, while FICO currently does not. For these reasons, VantageScore can be more advantageous for those new to credit such as college students or recent immigrants.

Lenders, especially larger banks and credit card issuers, are increasingly using the VantageScore to evaluate consumer credit. According to a recent study by VantageScore, use of their credit score increased by 20% between 2017 and 2018 and by 300% between 2013 and 2018.

 

There are a variety of scores lenders use to evaluate consumers’ credit profiles. The newest FICO scoring release is just the most recent development in a somewhat crowded space that is likely to continue evolving. If you have questions about how your credit is being evaluated and what steps you can take to potentially improve it, talk with your banker.