BANKING
BANKING
2025 Outlook : What ’ s Ahead for Banking and the Economy
Compiled by Jamie Grill-Goodman
With the presidential election in the rearview , many may be pontificating what ’ s ahead for New Jersey ’ s economic future .
COMMERCE reached out to leaders in New Jersey ’ s banking community to ask “ what economic factors are most influential in shaping the coming year for the state and the industry ?” Among the opinions , we heard that if the Federal Reserve continues cutting interest rates as expected , the banking industry will experience both challenges and opportunities in 2025 . Meanwhile business owners remain focused on planning for sustainable , long-term growth while also carefully paying attention to how they confront their immediate needs . Additionally , more consumer and business clients are waiting on the sidelines until they have a clearer picture of the potential impacts of the next administration .
Read on to learn what ’ s ahead for the banking industry and economy .
Columbia Bank Thomas J . Kemly President and CEO
We expect that potential policy changes and Federal Reserve action will lead to a stronger economic climate in 2025 . New
Jersey businesses have been both resilient , and cautious over the past year . With the election behind us and the Fed actively managing the interest rate environment , we anticipate that business investments will accelerate , and lending demand will rise .
ConnectOne Bank Frank Sorrentino CEO & Founder
Several economic factors are shaping the landscape for both New Jersey and the banking industry in 2025 . With recent interest rate cuts , we ’ re transitioning into a more favorable rate environment , gradually reaching a new normal that fosters economic stability and growth . This shift is expected to stimulate borrowing and investment activity , creating opportunities for strategic growth , while supporting a balanced pace of economic activity .
In New Jersey , the housing market remains a critical driver , fueled by low inventory that spurs robust construction and real estate lending . This shortage provides openings for developers and lenders to address housing needs with strategic projects that benefit local communities . Additionally , New Jersey businesses are adjusting to a normalized environment by prioritizing efficiency and profitability over rapid expansion , a trend that positions them well for sustainable growth .
As the economy evolves , relationship banking becomes more essential than ever . At Connect‐
One , we are uniquely positioned to guide clients through these economic shifts with a tailored , relationship-based approach that supports longterm stability . This commitment helps local businesses and individuals capitalize on new opportunities in a thoughtful , resilient manner .
As we move into the new year , ConnectOne sees ample opportunity for growth in a more balanced economy , where strategic investments in technology , housing , and local partnerships drive meaningful growth and opportunity across New Jersey .
New Jersey Bankers Association Michael Affuso , Esq . President & CEO
If the Federal Reserve continues cutting interest rates as expected , the banking industry will experience both challenges and opportunities in 2025 . Lower rates typically compress net interest margins , the difference between what banks earn on loans and pay on deposits . This will reduce profitability , especially for smaller banks that rely heavily on traditional lending . Banks may respond by increasing fees , tightening lending standards , or seeking higher-risk lending opportunities , which could elevate credit risks .
However , lower rates could also stimulate loan demand , particularly in sectors like mortgages , auto loans , and business credit . Banks with strong non-interest revenue streams – such as wealth management , investment banking , and payment services – may better navigate the environment . Additionally , lower rates may reduce funding costs , especially if deposit rates drop in tandem , helping banks manage liquidity more efficiently .
A prolonged period of rate cuts could also push banks to accelerate digital transformation and reduce operational costs to maintain profitability . Mergers and acquisitions may increase as smaller or struggling banks look for strategic partners .
Interest rates are falling . On Nov . 7 the Federal Reserve lowered interest rates by a quarter percentage point in the second cut of the year .
Photo : Getty Images / iStockphoto
TD Bank Don Buckley Commercial Market President of Northern NJ
Our state economy is poised to pick up the pace in 2025 as lower interest rates begin to stabilize overarching economic growth . As a fur‐ Continued
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