Report demonstrates cross-sell impact, with
data revealing commercial relationships that include treasury
management can generate three times the return on equity when
compared to credit-only relationships
Q2 Holdings, Inc. (NYSE:QTWO), a leading provider of digital
transformation solutions for banking and lending, will release its
State of Commercial Banking July 2023 Market Analysis following the
State of Commercial Banking Mid-Year Update webinar, which will
take place on Thursday, July 27, at 1 p.m. CDT. The report, based
on insights mined from Q2’s proprietary databases, is a mid-year
update to its annual review of the major trends in the commercial
banking industry, as well as a look at what the second half of 2023
may hold. The webinar provides an overview of report findings and
offers exclusive insight into commercial banking market trends and
mid-year predictions.
“In January’s analysis, we discussed the increasing pressure on
net interest margin (NIM), which has continued to escalate and
drive financial institutions to focus on developing and executing
strategies to foster primacy and drive deposit growth,” said Gita
Thollesson, manager, strategic advisory services, Q2. “Q2
PrecisionLender data suggests that despite liquidity challenges,
credit quality has remained fairly stable, and financial
institutions’ commitment to creating a collaborative environment
for treasury and loan officers is yielding quantifiable results.
Our data indicates banks prioritizing cross-sell, specifically when
the relationship includes treasury management, can generate up to
three times the return on equity when compared to credit-only
relationships.”
Findings for this report are based on Q2 PrecisionLender’s
proprietary database of 2023 commercial lending deal flow, along
with economic data from several public sources, including the
Federal Deposit Insurance Corporation (FDIC) and Federal Reserve,
and industry research. Q2 PrecisionLender data reflects commercial
relationships from more than 150 geographically diverse banks and
credit unions in North America, ranging in size from small
community banks to top 10 U.S. institutions.
Key Takeaways from the Report:
- Banks move aggressively to raise deposit rates: After a
sluggish start, banks have been quick to raise rates paid to
commercial customers, particularly on larger accounts. The
action—which bankers expect will help slow the deposit bleeding—is
coming at a cost: higher interest expense and lower net interest
margin (NIM);
- Bankers are showing conservatism in their pricing
strategies: At the start of the year, many experts predicted an
economic downturn, likely to be fast-tracked by the Fed’s
persistent rate increases. Regardless of whether the slowdown has
come to fruition, conversations with bankers and our data show
bankers are becoming more conservative in their pricing
strategies;
- Aggregate credit metrics hold strong, though pockets of
stress exist: The office sector is under stress with
delinquencies and charge-offs trending higher, and office vacancy
rates are on the rise. The trends underscore the importance of
active portfolio management in mitigating risk and maximizing
risk-adjusted returns; and
- Cross-selling is as important as ever: Facing higher
funding costs and rising provisions, additional focus on lucrative
fee-based business is critical. NIM is no longer rising with each
progressive rate hike and will face further pressure when rates
start to head south. Relationship retention and profitability data
indicates that the time to focus on relationship expansion is
now.
“The last several months have certainly been a wake-up call for
the commercial banking industry beyond what could have been
predicted at the start of the year,” said Thollesson. “As we look
to the second half of 2023, we feel it will be critical for
financial institutions to remain nimble and embrace collaboration
between treasury and loan officers while also focusing on
cross-sell opportunities to deepen client relationships and compete
in our ever-changing economic landscape.”
Click here to learn more and register for the 2023 State of
Commercial Banking Mid-Year Update webinar on Thursday, July 27, at
1 p.m. CDT. All registrants will receive a copy of the report
following the webinar.
To learn more about how Q2 delivers simple, smart, end-to-end
banking and lending solutions for commercial financial
institutions, visit: https://www.q2.com/commercial.
About Q2 Holdings, Inc.
Q2 is a leading provider of digital banking and lending
solutions to banks, credit unions, alternative finance companies,
and fintechs in the U.S. and internationally. Q2 enables its
financial institutions and fintech companies to provide
comprehensive, secure, data-driven digital client engagement
solutions—from consumers to small businesses and corporate clients.
Headquartered in Austin, Texas, Q2 has offices throughout the world
and is publicly traded on the NYSE under the stock symbol QTWO. To
learn more, please visit Q2.com. Follow us on LinkedIn and X
(Formerly Twitter) to stay up-to-date.
Forward-looking Statements
This press release contains forward-looking statements,
including statements about: increasing pressure on net interest
margin; financial institution focus on developing and executing
strategies to foster primacy and drive deposit growth; financial
institutions commitment to creating a collaborative environment for
treasury and loan officers; the ability of cross-sell combined with
treasury to generate additional return on equity; banker
conservatism in pricing decisions; trends and stress impacting the
office sector; the importance of active portfolio management in
mitigating risk and maximizing risk-adjusted returns; the
importance of cross-selling, focusing on fee-based business and
relationship expansion; the future impact on net interest margin of
future interest rate changes; and, the importance for financial
institutions to remain nimble and embrace collaboration between
treasury and loan officers while also focusing on cross-sell
opportunities to deepen client relationships and compete. The
forward-looking statements contained in this press release are
based upon Q2’s historical performance and its current plans,
estimates, and expectations and are not a representation that such
plans, estimates or expectations will be achieved. Factors that
could cause actual results to differ materially from those
described herein include risks related to: uncertainties in the
banking and financial services industries, including as a result of
recent bank failures, and the potential impacts on Q2’s customers'
prospects and Q2’s business sales cycles, Q2’s prospects' and
customers' spending decisions, including professional services
which are more discretionary in nature, and the timing of customer
implementation and purchasing decisions; (b) the risk of increased
or new competition in Q2’s existing markets and as Q2 enter new
markets or new sections of existing markets, or as Q2 offer new
solutions; (c) the risks associated with the development of Q2’s
solutions and changes to the market for Q2’s solutions compared to
Q2’s expectations; (d) quarterly fluctuations in Q2’s operating
results relative to Q2’s expectations and guidance and the accuracy
of Q2’s forecasts; (e) the risks associated with anticipated higher
operating expenses in 2023 and beyond; (f) the impact that
inflation, rising interest rates, an economic stagnation or
slowdown in the economy, or challenges in the financial services
industry, financial markets and credit markets have had to date or
in the future could have on account holder or end user, or End
User, usage of Q2’s solutions, including the promotion and adoption
of Q2’s Helix and payment solutions, and on Q2’s customers'
prospects and Q2’s business sales cycles, Q2’s prospects' and
customers' spending decisions, including professional services
which are more discretionary in nature, and the timing of customer
implementation and purchasing decisions; (g) the risks and
increased costs associated with managing growth and the challenges
associated with improving operations and hiring, retaining and
motivating employees to support such growth, particularly in light
of the macroeconomic impacts of the novel coronavirus disease, or
COVID-19, including increased employee turnover, labor shortages,
wage inflation and extreme competition for talent; (h) the risk
that the residual impacts of the COVID-19 pandemic and the
associated efforts to limit its spread continue to negatively
impact or disrupt the markets for Q2’s solutions and that the
markets for Q2’s solutions do not return to normal or grow as
anticipated; (i) the risks associated with Q2’s transactional
business which are typically driven by end-user behavior which can
be influenced by external drivers outside of Q2’s control; (j) the
risks associated with effectively managing Q2’s cost structure in
light of the challenging macroeconomic environment, challenges in
the financial services industry and from the effects of seasonal or
other unexpected trends; (k) the risks associated with the general
economic and geopolitical uncertainties, including the heightened
risk of state-sponsored cyberattacks on financial services and
other critical infrastructure, and continued or increased inflation
partially driven by increased energy costs or other unpredictable
economic impacts that have and may continue to negatively affect
demand for Q2’s solutions; (l) the risks associated with managing
Q2’s business in response to continued challenging macroeconomic
conditions, challenges in the financial services industry and any
anticipated or resulting recession; (m) the risks associated with
accurately forecasting and managing the impacts of any
macroeconomic downturn or challenges in the financial services
industry on Q2’s customers and their end users, including in
particular the impacts of any downturn on financial technology
companies, or FinTechs, or alternative finance companies, or
Alt-FIs, and Q2’s arrangements with them, which represent a newer
market opportunity for us, a more complex revenue model for us and
which may be more vulnerable to an economic downturn than Q2’s
financial institution customers; (n) the challenges and costs
associated with selling, implementing and supporting Q2’s
solutions, particularly for larger customers with more complex
requirements and longer implementation processes, including risks
related to the timing and predictability of sales of Q2’s solutions
and the impact that the timing of bookings may have on Q2’s revenue
and financial performance in a period; (o) the risk that errors,
interruptions or delays in Q2’s solutions or Web hosting negatively
impacts Q2’s business and sales; (p) the risks associated with
cyberattacks, data and privacy breaches and breaches of security
measures within Q2’s products, systems and infrastructure or the
products, systems and infrastructure of third parties upon which Q2
relies and the resultant costs and liabilities and harm to Q2’s
business and reputation and Q2’s ability to sell Q2’s solutions;
(q) the difficulties and risks associated with developing and
selling complex new solutions and enhancements with the technical
and regulatory specifications and functionality required by Q2’s
customers and relevant governmental authorities; (r) regulatory
risks, including risks related to evolving regulation of artificial
intelligence, or AI, machine learning and the receipt, collection,
storage, processing and transfer of data; (s) the risks associated
with Q2’s sales and marketing capabilities, including partner
relationships and the length, cost and unpredictability of Q2’s
sales cycle; (t) the risks inherent in third-party technology and
implementation partnerships that could cause harm to Q2’s business;
(u) the risk that Q2 will not be able to maintain historical
contract terms such as pricing and duration; (v) the general risks
associated with the complexity of Q2’s customer arrangements and
Q2’s solutions; (w) the risks associated with integrating acquired
companies and successfully selling and maintaining their solutions;
(x) litigation related to intellectual property and other matters
and any related claims, negotiations and settlements; (y) the risks
associated with further consolidation in the financial services
industry; (z) the risks associated with selling Q2’s solutions
internationally and with recent expansion of Q2’s international
operations; and (aa) the risk that Q2’s debt repayment obligations
may adversely affect Q2’s financial condition and cash flows from
operations in the future and that Q2 may not be able to obtain
capital when desired or needed on favorable terms.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230726985376/en/
Carly Baker Q2 Holdings, Inc. +1 210-391-1706
Carly.baker@q2.com
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