Home and car loans have fallen because the economy has reduced savings, but there is relief, said the manager of Citizens Bank.

Bank shares have fallen in recent days as a string of major lenders — reporting sales and earnings last year, and looking ahead — show more signs that the economy is slowing because of the Federal Reserve. raise the price of money against inflation.

Bruce Van Saun, the CEO of Citizens Financial Group, which operates several bank-branch networks in the Philadelphia area, agreed to address the Inquirer’s questions after meeting with investors. The interview has been edited for clarity and clarity.

You told investors at your quarterly meeting on Tuesday that we may have seen the worst of the slowdown. What is ahead?

We have seen inflation drop to 3% (from 8%) last year at the end of the year. Unemployment, maybe 4% to 4.25% (up from 3.5%). And we’re moving into a normal interest rate environment. There are probably two Fed rate hikes at the beginning of this year (0.25% each) and a cut at the end of the year.

There is still growing economic uncertainty. But we expect that the economy will actually grow, about 1% (in 2023), and more next year.

Are Citizens seeing a reduction in home and auto loans?

We are (reduce) our car loan. And mortgage lending fell lower than expected.

How do small investors manage?

Some investors are migrating to interest-bearing investments. The bottom line (20%) of our customers are returning live check to check.

Does the slowdown mean housing prices will fall?

Most forecasters are saying (home prices) will show mid to high single-digit declines if (interest rates) remain high. We hope to refinance the mortgage sometime this year.

When will construction return?

Happy days for real estate developers when they can make financing and use the money quickly for another project that has been put on hold. When the Fed gets rates to its destination, the financial markets will collapse, and all the private equity funds will start to fire again. The Fed’s rate cut will ease pressure on the mortgage and real estate markets in the city.

Are developers and landowners Worried about losing office tenants?

We think the city (offices) is better than the city. In Philadelphia, people don’t come back to work the way they might. Office buildings in urban areas are more common than in industrial districts. The neighborhood doesn’t see the resistance to coming back to the office that you see downtown.

Most of the tenants in our markets are life-science companies, and we don’t care much about those things.

Will developers prefer to convert unwanted offices into apartments?

Automakers will be more likely to cut prices to keep sales up, as Tesla has done?

I didn’t see it. But we hope that used cars and trucks will go down. In 2022, (a borrower or debtor) can recycle a car and make a profit. That has changed.

Citizen (after buying two banks in New York last year) reported a profit of $653 million in the last three months of 2022, up 32% from the previous year. Profits are high. If you don’t lend out as much, what will you do with the money you get?

There are enough reserves (even if the economy shrinks rather than slowly expands). We expect to pay more of our (profit) to shareholders this year.

What about your private partners, who are also funding many projects?

Personal finances are covered in cash.

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