Q&A: St. Louis’ largest commercial lender sees more projects after interest rate cuts

UMB Bank more than doubled its outstanding commercial loans between 2022 and 2023, growing from $1.66 billion to $3.44 billion and helping push the bank to be St. Louis’ largest commercial lender.

Peter Blumeyer, president of UMB St. Louis said 2024 has been a good year so far, though not as impactful as 2023. And the outlook is encouraging, after the Federal Reserve cut its benchmark interest rate by a half-point in September.

According to the Federal Deposit Insurance Corporation, Missouri has over 250 banks, not including the branches, and the city of St. Louis has a dozen.

In the St. Louis region, the largest banks, based on local deposits as of 2023, include U.S. Bank, Stifel Bank & Trust, Bank of America and Commerce Bank.

St. Louis is also home to one of the 12 regional Reserve Banks that make up the country’s central bank. The Federal Reserve Bank of St. Louis, represents all of Arkansas and parts of Illinois, Indiana, Kentucky, Mississippi, Missouri and Tennessee.

Recently, at UMB Bank’s St. Louis office overlooking the Old Courthouse downtown, Blumeyer spoke about the bank’s commercial lending growth and how the drop in interest rates is impacting area projects.

This interview has been edited and condensed for clarity.

Q: Last year was a growth year for the bank. How’s 2024 been for UMB St. Louis, in terms of growth? What is contributing to that?

Blumeyer: We’ve had another tremendous year in 2024, across all of our business lines (commercial and industrial lending, commercial real estate). Loan growth has been a big driver, but we’ve seen good growth in our deposit base and also what banks generally refer to as non-interest income, things like credit cards and treasury management products. It wasn’t quite as strong as 2023, but we’re still projecting over 10% growth across the board. We’re really pleased with how this year has turned out and look forward to duplicating it in 2025

You’ve seen an uptick in activity with the Fed interest rate cut, where now people feel more comfortable that we are in a declining rate environment, and so the cautiousness of hoarding as much cash as possible is alleviating.

Q: After the Fed announced its rate cut in September, was there a direct reaction to the news or has it been a slower build?

Blumeyer: It’s a little bit of a slower build. I think the immediate reaction is a sigh of relief, whether you’re a consumer or a business owner, because lower borrowing costs help all people. I think once that happened and became official, that’s really where you saw the loosening and people starting to look at their plans and make decisions about which project they might want to take off the table, which piece of equipment they might want to buy, do they want to add more full-time employees.

When the Fed meets again in November, the projection is they’ll cut (rates again), and so I think as people continue to get those data points, that it’s going to be going down, they become more and more comfortable in the commercial, industrial and real estate segments to begin doing projects again.

Q: Are you seeing any particular trends or big things on the horizon in terms of the manufacturing projects and industrial projects that are brought to you?

Blumeyer: I think again all the manufacturing companies continue to look at if they can add a business line, but there aren’t any major projects that are moving through there. There are some projects, whether major or not, in our commercial real estate group that were dormant for a while. The developer was not pursuing them at that time because of where interest rates were. Now, with those cuts moving through, the developers are coming back saying, ‘This project now works. I wanted to proceed with it.’ That’s where we’ve seen more projects coming alive.

Q: What are people asking you about right now? What kind of conversations are you having around banking?

Blumeyer: Fraud continues to be a massive part of the conversation. How can we help (customers) prevent fraud as much as we can? It really has become a when, not an if, for any business. What tools and what resources and what education can we bring to the table to help them make sure they mitigate it as much as possible?

Outside of that, I would think everyone is very interested to see how AI plays out and how that will impact the business in the future. Will it afford them (customers) any efficiencies that they’re able to create that would help (their) businesses in a way that they might not even be able to imagine right now?

Q: Does UMB St. Louis have plans to utilize AI?

Blumeyer: Like every company right, we’re looking at it, we’re paying attention, we’re studying it to see where maybe we can create some efficiencies, if we can at all. It still feels really, really new.

Q: Is there a lot of competition in the St. Louis market with other banks? Are you fighting other banks to get these projects and clients?

Blumeyer: There are a lot of great banks in St Louis. It’s not a high-growth region like Dallas or Phoenix. We have stable, steady growth and so you have a lot of banks that are fighting over the same (customers). We always see competitive deals that really run the gambit in terms of bank sizes … but it continues to be an ultra-competitive market.

I do feel like we have a larger number of banks than most markets. But I do kind of laugh, because you could go to a city like Minneapolis, which is dominated by Wells Fargo and U.S. Bank, but when you look at that, there’s still a competition with them — while you go to St Louis, which has a much more fragmented banking industry, where you don’t necessarily have one large, dominant player and so that brings the competition.

Q: A large part of UMB St. Louis is its commercial lending capabilities and I understand you, Peter, specialize in commercial industrial banking. How would you characterize the commercial industrial market for development in St. Louis?

Blumeyer: It continues to be strong. The manufacturing base continues to do well. Contractors continue to do well. Distribution companies continue to do well, so the overall economy in St Louis continues, in terms of our book, to perform well. You might have some companies that have lower revenue, but they all remain profitable. They continue to build their balance sheets and now, with interest rates coming down, they’re looking to deploy capital and kind of reinvest in the business and continue to grow upward. We don’t see any major signs of trouble within our own book.

Q: What are you anticipating in 2025?

Blumeyer: We continue to see growth, albeit it could be lower growth, in the economy. We think our manufacturing, our distribution and our contractors will have good years. That’s what they’re telling us. We think commercial real estate will pick up as interest rates continue to come in. It should look pretty similar to 2024, in terms of our own growth. We’re not seeing any major signs of deterioration that would make us concerned about the economy — but 15 months is a long time for things to change.

View life in St. Louis the week of Oct. 13, 2024

View life in St. Louis through the Post-Dispatch photographers' lenses. Edited by Jenna Jones.

___

(c)2024 the St. Louis Post-Dispatch

Visit the St. Louis Post-Dispatch at www.stltoday.com

Distributed by Tribune Content Agency, LLC.