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Banks: Lending standards in the neutral range amid moderate growth

| February 7, 2020

This document is intended for institutional investors and is not subject to all of the independence and disclosure standards applicable to debt research reports prepared for retail investors. This material does not constitute research.

The modest tightening of bank lending standards in 3Q of 2019 was mostly reversed by an easing of standards in 4Q, according to results from the Fed’s senior loan officer’s survey (SLOOS). The loosening in credit conditions did not push banks meaningfully into easing territory, but it did occur alongside an improvement in financial conditions during the quarter. Bank lending standards overall in 2019 moved sideways in a narrow channel around neutral. Highlights of the report include easing standards for commercial and industrial (C&I) loans in conjunction with a slight uptick in demand, though both measures still reflect relatively weak equipment capex growth. Commercial real estate (CRE) lending standards have moderated with only 3% of banks tightening – the lowest percentage in two years – but so far construction spending growth has not turned higher. On the consumer side banks continue to tighten standards for credit card and auto loans, but eased standards for residential mortgages as demand increased. The Fed senior loan officer survey is here and the CreditSights article is here (subscription required). Source: FRB, CreditSights, APS

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