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BBVA Research Economic Outlook 2013

BBVA Research Economic Outlook 2013

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Every quarter, the bank's economic research team publishes its Economic Outlook, a report focused on a variety of issues that affect the U.S. as a whole as well as the Sunbelt states where BBVA Compass operates.
In the recently released second quarter outlook, the economists examined the U.S. economy, interest rates and technology topics, including mobile banking and crowdfunding, also known as crowdsourcing. The increasingly popular trend of crowdfunding allows businesses and individuals the opportunity to raise money from a large pool of people and provides an unprecedented source of capital, the bank's economists say.
Every quarter, the bank's economic research team publishes its Economic Outlook, a report focused on a variety of issues that affect the U.S. as a whole as well as the Sunbelt states where BBVA Compass operates.
In the recently released second quarter outlook, the economists examined the U.S. economy, interest rates and technology topics, including mobile banking and crowdfunding, also known as crowdsourcing. The increasingly popular trend of crowdfunding allows businesses and individuals the opportunity to raise money from a large pool of people and provides an unprecedented source of capital, the bank's economists say.

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Categories:Types, Business/Law
Published by: CrowdfundInsider on Jul 03, 2013
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06/16/2014

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Economic Outlook
United States
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U.S. Economic Outlook
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Index
1. Editorial
................................................................................................................................................................................................................................................................... 1
2. Growing Divergences in the Global Economy
............................................................................................ 2
3. U.S. Outlook
................................................................................................................................................................................................................................................ 6Box 1: A Closer Look at Deleveraging and Household Wealth .......................................................................................................................... 9
4. The Federal Reserve and the Future Patho LongTerm Interest Rates
........................................................................................................................................................................ 10Box 2: Fed’s Policy o Large Scale Asset Purchases When is the Right Time to Stop? ....................................................... 13
5. State Budgets Improve, Far From Resilient
......................................................................................................... 16Box 3: Should State Legislatures Get Credit or the Rebound in Revenues? .................................................................................. 17
6. A Discussion on the Consumers andMobile Financial Services Survey o 2013
............................................................................................................. 24
7. Crowdunding: A Disruptive Technology or Commercial Banks?
..... 28
8. Factsheet
........................................................................................................................................................................................................................................................ 35
9. Forecasts
............................................................................................................................................................................................................................................................ 36
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See page 37 or the Disclaimer
 
Page 1
U.S. Economic Outlook
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1. Editorial
Over the past three years, US commercial banks’ profitability experienced a remarkable recovery.However, standard perormance metrics like the price to earnings ratio, return to equity and return toassets are still lower than the precrisis period. This raises the question o whether a ull recovery is justa matter o time or i there has been a structural shit toward permanently lower bank profitability in anew postcrisis environment.Foremost, bank revenues depend on credit growth and overall economic activity. In this regard, theoutlook is somewhat somber as loan demand will expand at a slower pace – at least in the shortterm than during the boom years due to lower potential output and the deleverage process that has orcedhouseholds to realign their balance sheets.To counteract these orces and remain competitive, banks are adjusting their business model. Thisredesign will be the financial industry’s most dramatic transormation in modern history, as it implies anamalgamation o changes; in particular, the adoption o new technologies and the implementation oconsumercentric strategies, in a more regulated environment.On the technological side, one undamental change will be increased Internet and mobile device usage,which continue to acilitate a shit rom cash and traditional payment instruments like checks and creditcards, to more sophisticated and costeective options such as mobile wallets and contactless systems.In addition, some core activities will become noncore, branch layouts and occupations will adjustor disappear, some peripheral businesses could become key revenue sources and new businesseswill emerge. Moreover, technological change increases the productivity o banks, but it also boostscompetition rom nonbanks. These new players present a challenge to the industry as they oten havea comparative advantage when it comes to technological readiness.To succeed in this new hyperconected and competitive environment, banks will have to ollow acustomercentric approach and oer simple, userriendly and eective products, with a high level otransparency and security. Other decisions related to changing the internal organization, attractingtalent and adopting new technologies will prove crucial.These transormations will reduce transaction costs, increase valueadded, improve customersatisaction, and boost revenues. Without a doubt, the biggest winner will be the customer, includingpeople and businesses that currently have limited or no access to financial services. Moreover, thistransormation will result in a more eicient financial system that will be in a stronger position to supporteconomic growth and wealth creation.However, banks ace new capital adequacy standards as proposed by the Basel Committee on BankingSupervision, which will require new equity or rising retained earnings. In addition, the Dodd–Frank WallStreet Reorm and Consumer Protection Act, which was signed into law in July 2010, increases thecosts o daytoday operations, limits noninterest income, and establishes new rules or investmentsmade with bank capital. Moreover, the Credit Card Accountability Responsibility and Disclosure Act o2009 and Regulation E urther increase operating costs and reduce earnings. Hopeully, policymakersare making a careul attempt to achieve the right balance when implementing new regulations, asoverregulation could cause banks to perceive disincentives to innovate and delay technological changeinstead o building better and saer financial institutions.Nathaniel KarpChie U.S. EconomistBBVA Research

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