August 17, 2018

Spotty Loan Growth Across Big Banks

Excerpt:

Loan growth was very mixed in the second quarter at large and regional banks. Both total growth and individual lines fell at some banks and rose at others. The only consistent loan growth occurred at credit unions.

Post:

The second quarter reporting period for large and regional banks showed no clear loan growth picture. Total loans at some banks were up, others were down. Some lines rose, but their contribution was often negated by weakness in another line. 

Quarterly loan growth results for banks were mixed. 

Mixed Results at Many Banks

As the American Banker points out, of 10 big banks who reported in July, five reported minimal increases in total loan growth (under 2.5%) and two reported 4% growth versus the year-prior period. But lest this be seen as a unified picture of some expansion, at least, both Wells Fargo and Regions Financial reported a drop in total loans. 

The Wall Street Journal reported that total loans were up 4% at both JP Morgan and Citigroup, largely because of strength in corporate loans. Total loans grew at PNC as well. 

Total loans grew at Citigroup, but at a far less robust pace than in the previous quarter. The growth was 4% in the second quarter versus 7% in the first. Citigroup executives, though, noted that business loan growth was strong, and attributed the slowing total figure to a credit-card portfolio sale.

Even with the strength, line results were mixed. Mortgage lending was weak at JPMorgan. Mortgage lending at Wells Fargo fell year-over-year, from $1.15 billion to $770 million in fees.

The major banks did indicate that loan demand was robust, with JPMorgan pinpointing demand from the merger & acquisitions arena.

SunTrust reported a common situation: growth in several lines was counterbalanced by falling loans in other lines, for an ultimately flat picture for total loans year over year. In SunTrust’s case, direct consumer and commercial real estate (CRE) loans rose, but business and construction loans fell. 

Regional banks performed no differently. Alabama-based Regions Financial saw a rise in commercial and industrial (C&I) loans, of 3.6%. But its CRE loans fell 7%. 

Growth in business loans but falling consumer loans were seen at both Connecticut-based Webster Financial and Oregon-based Umpqua Holdings. Webster was one of several banks that saw robust increases in C&I loans, of 14%. KeyCorp reported an 11% growth in the category. 

Credit unions enjoy consistent lending growth.

Loan Growth at Credit Unions Consistent and Strong; Will that Continue?

In comparison to banks, credit unions have been a bright spot for lending growth. The Credit Union National Association (CUNA) noted that such growth has been both consistent and “significant.” In fact, credit unions have reported loan growth above that of banks for 12 consecutive years. 

Based on expectations of positive short-term effects of the tax cuts, CUNA economists "increased their economic growth forecast for 2018 from 2.75% to 3%." But there are concerns about the impact of inflation and tariffs. With increasing interest rates, growing national debt, and the potential effects of a trade war, the economist's forecast for 2019 dropped from 2.5% to 2.25%.

Let a Loan Sale Advisor Help

The danger in periods of mixed or falling growth, of course, is that banks might be tempted to lower credit standards to pursue growth. A better path is letting the loan sale advisors at Garnet Capital help your bank add good quality loans.

For more information, sign up for our newsletter.