Is there any end to banks’ easing of standards on business loans?
Loan underwriting is getting pretty loose. The Federal Reserve’s Senior Loan Officer Survey for July shows banks easing standards (yet again) for industrial & commercial loans. The percentage of domestic U.S. banks easing actually was near the highest its been since 2011. Demand for C&I loans is high, and “spreads above funding” continue to narrow.
“About 20% of banks reported easing C&I lending standards to large/middle market firms over the past three months, including narrowed spreads and premiums charged, as well as extended loan durations, higher maximum credit lines and lighter covenant provisions,” said a note from Todd Hagerman and Robert Greene of Sterne Agee. What’s driving the trend? Seventy percent of the banks said competition from banks and nonbanks; 50 percent said an improving economy.
The Fed’s survey also showed increasing demand for commercial real estate loans, including construction and land development loans. I hope banks don’t get too aggressive on those balance-sheet busters again.
- Fed Loan Survey Shows Easier Lending for Mortgages, Businesses (bloomberg.com)
- Demand for Business Loans Increasing, Credit Eases (blogs.wsj.com)
- Banks slightly ease mortgage lending standards (hsh.com)