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    Outsourcing Lending | 2 min read

    Actions Items for Financial Institutions in Q3-4 2022

    Without a doubt, we are seeing a deceleration in the U.S. economy as the economic recovery from COVID-19 is all but complete. The unemployment rate is basically at its pre-pandemic level at 3.6% compared to 3.5% in February of 2020. Now, we enter the transition back to a more sustainable or normalized rate of growth.

    Outlook for U.S. Economy Q3-Q4 2022

    Despite an anticipated weak first quarter, we do expect second-quarter GDP growth for the year to be slightly stronger coming in at 1.5-2.0%.

    Here’s a quarterly breakdown of what to expect for GDP growth in 2022:

    • 1st quarter to be 0.6-1.2% (weaker due to large inventory numbers in Q4 2021)
    • 2nd quarter will improve slightly to 1.7-2.2% (inflation will keep a lid on growth)
    • 3rd quarter will likely be 2.0-2.5% (some improvement in prices and supply chains)
    • 4th quarter will slow to 1.5-2.0% (tighter policy and labor tightness slow us down)

    As a reference point, the U.S. Congressional Budget Office estimates the long-run growth potential for the U.S. economy is around 1.8%. So, in short, we are returning to this longer-run rate.

    Risks to this outlook are not balanced with greater risk to the downside, meaning revisions will likely be downward, not upward.

    In fact, we estimate the odds of a recession over the next 12-18 months are around 30%.

    Action Items for Financial Institutions in Q3 and Q4

    Risk Management

    With consumers under increased pressure from negative real wages and declining savings, they will become increasingly vulnerable to falling behind on debt payments and insurance premiums. Strong monitoring, good communication with borrowers, robust collections efforts, and efficient resolution practices (foreclosure and repossession) will be necessary to navigate the increasing risk climate.

    Additionally, strong interest rate risk monitoring and mitigation efforts will be critical in a rising interest rate environment including increases to loan loss reserves.

    Non-interest Income

    As loan demand softens and margins remain tight, financial institutions will need to continue exploring alternate sources of income. With recent efforts by the Consumer Financial Protection Bureau (CFPB) and members of Congress pushing for the elimination of NSF and other fees, depository institutions will have to be creative in finding new sources.


    In what we expect to remain a theme for the next decade or more, as labor markets tighten, financial institutions will need to not only automate but to find the most cost-effective and customer-friendly solutions in order to remain competitive. As a result, enhanced cyber security and the use of strong data analytics will become necessities.


    In addition to automation, depository institutions will also need to consider outsourcing either onshore or offshore many of their most labor-intensive activities. Because the U.S. is unlikely to make meaningful reforms to its immigration policies and slowing domestic birth rates, employers in every sector will need to source talent where it is. This will likely mean other states where labor costs are relatively lower or offshore/nearshore.


    With the economy downshifting into a slower, more normalized growth pattern, financial institutions will need to adjust as well. As loan demand naturally softens off record 2020 and 2021 levels, financial institutions need to look for alternative sources of revenue from fees and other non-interest income. Additionally, look for ways to reduce labor expenses through automation and outsourcing and consider stepping up risk management efforts as the expected rise in delinquencies comes to pass.

    Free White Paper: Click here to get your copy to the Q2 2022 Quarterly Economic Outlook for Financial Institutions

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    Outsourcing Lending

    Blake Hastings

    Blake Hastings joined SWBC as Senior Vice President of Corporate Strategy and Chief Economist in July 2021. In this role, he provides leadership in the areas of corporate development and long-term growth strategies. He also supports our business development goals and activities by leveraging external relationships in both the public and private sectors. Additionally, Blake provides direction in the assessment, evaluation, and management of risk throughout the organization. Prior to joining SWBC, Blake worked for the Federal Reserve Bank of Dallas for over 14 years. He served as a Senior Vice President overseeing the San Antonio and El Paso branch offices.

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