A year of transition in the local and state banking markets includes an under-the-radar Wells Fargo & Co. element.
The bank recently announced a new structure for its commercial banking business to combine business, middle market and government and institutional sectors.
Wells Fargo chose Clarence McDonald, a 24-year company veteran, as market executive for its Triad West territory. He oversees 11 offices serving business customers with annual revenues of $5 million to $2 billion.
McDonald and Leigha Smith, the bank’s Piedmont region president, took time recently to share their perspectives on the bank’s Triad presence and the local and national economic outlook.
An edited version of their joint remarks follows.
Q: It seems that the state of the national and North Carolina economies have become top of mind for both socioeconomic and political reasons.
What are the chances of a recession occurring between now and November 2020, and if the odds are rising, what are becoming the triggers for the economic slide?
Answer: Despite some uncertainty in the economic picture, we think the chance of a recession between now and the election in November 2020 is pretty low.
Here in the Winston-Salem area, we continue to see strong results from business customers in the market. The Wells Fargo small business survey recently showed rising optimism, positive consumer sentiment; and the Federal Reserve has shifted to a more accommodative policy.
As far as triggers to watch for, we would pay attention to trends in consumer spending, business fixed investment and commercial real estate — but we do not see issues in any of these areas at the moment.
Q: In the 2008-11 recession, there clearly was a bursting of the housing bubble, but also one in failed commercial real estate loans that led to several N.C. super-community and regional banks taking on private-equity funds and eventually most selling out.
What is the state of commercial real estate? Is there still a cooling in terms of building shopping centers given brick-and-mortar retail’s struggles, and do you see apartment building continuing on its current pace?
Answer: We would describe the state of the Triad commercial real estate market as robust.
We do see a cooling in the building of new shopping centers, but see an increase in the upfit and/or repurposing of older centers across the region.
While we may not continue to see the very strong rate of growth in apartment units that we have seen, we do think we will see that pace of growth remain steady pace in the Triad.
One recent trend of note in commercial real estate is the sharp drop in interest rates, which has led to a significant increase in the number of requests from real estate owners to refinance existing debt.
Additionally, we are seeing investors lock in lower rates, reducing their payments, and in some cases taking out equity to either improve the property or for other capital investments.
Q: How can the Triad and western N.C. continue to compete with the state’s two economic engines — Charlotte and the Triangle —in terms of attracting investment outside companies likely favoring being a big fish in a smaller pond?
Answer: Charlotte and the Triangle have certainly been key drivers of North Carolina’s growth in recent years.
However, we have seen more growth spreading into the Piedmont Triad and Western North Carolina in the last few years.
We would argue that we need to play to our strengths in order to attract further investment. Those strengths being location, infrastructure, quality of our workforce, educational assets, and overall quality of life.
Q: Likewise, how can the Triad and western N.C. compete for skilled employees, whether in advanced manufacturing, information technology, business and finances, and the like when they keep losing corporate headquarters, whether BB&T or Krispy Kreme?
Answer: Similar to the above answer, we think we need to play to our strengths.
While the loss of corporate headquarters are certainly disappointing, we still have many great companies that are either based here or have a significant presence here, including Wells Fargo, where people can have a wonderful career.
Winston-Salem has made great strides in developing the infrastructure to support people wanting to start their own companies.
We need to continue to support the growth and success of our existing businesses, while we market the opportunities to land a transformational project for the region.
Q: What is holding businesses back from making significant capital investments, and what sectors are making those investments in move-the-needle fashion?
Answer: For those companies that are holding back on capital investment, the main driver of that decision is uncertainty. That uncertainty ranges from specific issues, such as trade and tariffs, to a general uncertainty about the direction of the overall economy.
With that said, we still see companies making capital investments, especially in equipment and technology, that leads to reductions in labor content and/or general efficiencies.
We are also seeing some significant investments where companies have an opportunity to gain access to new markets or gain a new capability.
Q: JPMorgan Chase & Co. is entering the North Carolina banking market, perhaps sensing vulnerability with Wells Fargo, super-regional and community banks now owned by out-of-state banks and customer run-off from BB&T-SunTrust pending megadeal.
How does your group plan to offset and counter that invasion and retain current customers?
Answer: Wells Fargo is proud to be an important part of communities across North Carolina, including Winston-Salem and the Piedmont Triad. We are also proud of the 35,000 team members we have across the state who are committed to offering the best financial service and advice to our customers every day.
Competition makes us better and benefits customers.
There are a number of competitors that have announced plans to enter the North Carolina banking market, including the Piedmont Triad.
We view this as a compliment, as others realize what we have known for a long time — this is a great part of the country with wonderful people and a robust economy.
Any entries into this market do not alter our long-term plan, which is to focus on the many strengths Wells Fargo has in this market, including:
- Long-term deep relationships with many companies and organizations in this market. Some of these stretch back to the late 1800s;
- Our people: We have approximately 3,000 team members in the Piedmont Triad who are dedicated to serving the financial needs of our customers.
- Local decision-making: We empower our team members to deliver the many resources of Wells Fargo and to make credit and financing decisions locally.