DALLAS — This story originally appeared in the Dallas Business Journal, a WFAA news partner.
Is the economy in a recession? It depends on who you ask.
But one thing bankers in North Texas seem to agree on is their confidence that the region will weather the storm better than the rest of the country. They also all see a recession as an opportunity for their companies to gain an edge over competitors and take market share.
Warrie Birdwell, North Texas regional president of Ruston, Louisiana-based Origin Bank, avoids using what he refers to as "the R-word." He acknowledged that high inflation and soaring interest rates negatively impact individuals and companies. However, Birdwell said he remains confident in North Texas because the region's population keeps growing and it continues to add jobs.
Texas overall added 49,500 jobs in October, according to data released Friday by the U.S. Department of Labor. The state has experienced 5.4% job growth over the last 12 months compared to 3.6% for the entire country. Within Texas, Dallas-Fort Worth has added the most jobs. DFW grew at a 6.5% clip over 12 months as of September, the most recent month for which metropolitan labor data is available.
"You have a bunch of companies continuing to move to Texas, jobs continuing to move to Texas and people continuing to move to Texas," Birdwell said. "With all that movement and growth comes the opportunity for financial institutions like us to help those companies blossom."
Birdwell also said recessions do not last long, historically, and financial institutions overall currently have stronger balance sheets than they did before the Great Recession.
"If you were to simply compare this to 2008, banks have twice the amount of capital they had back then," Birdwell said. "I don't think there's near the leverage that there was in the entire system."
Origin will continue to lend, Birdwell said, and he does not anticipate the bank changing its underwriting guidelines.
"At the end of the day, an opportunity needs to make economic sense," he said. "If it doesn't pass that test, it shouldn't go forward. But we'll continue to support our customers and continue to be opportunistic with prospects."
Rob Holmes, CEO of Texas Capital Bank, said he believes the U.S. is already in a recession based on the "textbook definition" of gross domestic product declining during two consecutive quarters.
Even in Texas, the "good economic news is moving in the wrong direction," Holmes told analysts during an October conference call. He pointed to a deceleration in the state's job growth during the third quarter and declining home sales combined with rising inventory as examples. Holmes also said a strong U.S. dollar hurts Texas companies while inflationary pressure hurts consumers.
Holmes reiterated his thoughts on the economy in an interview but said he sees a recession as an "opportunity" for Texas Capital. Holmes has been leading the Dallas-based financial institution through an enterprise-wide transformation that began in 2021. The effort has focused on shifting the bank away from loan growth and expanding its treasury and private wealth services, as well as establishing an investment bank.
"The bank market has been exuberant for a while and a lot of banks have competed aggressively on structure and price," Holmes said. "I think the bank market will become much more rational in a slowed economic environment which will create opportunity for us we believe because we think we're in really good shape."
As the Federal Reserve continues to hike interest rates, Holmes said he hopes the central bank does not "overshoot" in its attempt to get inflation under control. High-interest rates will impact employment and demand, he said.
"I understand we have to stop inflation," Holmes said. "I'd like to see responsible government policy."
Goldman Sachs currently puts the odds of a recession in 2023 at 35%. Scott Mueller, who is based in Dallas and leads the Southwest region for Goldman Sachs' private wealth management division, agreed with Holmes that the economy has met the textbook definition of a recession. Like Birdwell, he expects the impact to be "less stark" in DFW because of the region's economic strength.
"North Texas will not be impacted as strongly as other parts of the country, you can be comfortable with that statement," Mueller said. "We'll still be driven by the macro economy, but there's a growth tailwind here just by population growth and the associated economic activity group that will help alleviate that effect here. It should continue to be a business opportunity as a result, for all of us on the private wealth management side in this whole region."
