2023: The Year of the "Uncertain" Budget

ALCO|Interest Rate|Loans|Deposits

If there were ever a time when institutions across this country spent countless hours to be “precisely incorrect,” it was the 2022 budgeting process! The FOMC was simply wrong in their so-called elevated transparency with the FOMC Dot Plot; their summary of economic projections turned out to be wildly inaccurate. Just about all other forecasters from the “street” suffered a similar fate.

If you rewind twelve months, many institutions were frightened in terms of what could happen to earnings during 2022. But the reality is that most institutions exceeded their budgeted levels of net interest income.

As we enter 2023, balance sheet managers are again confronted with perhaps more uncertainty than ever before. Trying to determine what the key contributing variables look like for your institution from a bottom-line earnings perspective could be considered an artform.

I think this is the year that slight variations and tweaks on a few key assumptions on both volume and rate can create clarity for your management team, board, and shareholders. If you think you have a chance of missing the mark, what are the key drivers that could cause that to happen?