Business lending is back in a big way.
Last year, commercial and industrial loan portfolios of U.S. banks jumped a whopping 12.3%, to $661.5 billion, according to data prepared for American Banker.
The gain came on the heels of a 9% increase in 1994 that ended a lengthy slump in commercial lending by banks.
Business lending generally - a broader category that includes, among other things, lease receivables and loans for commercial real estate and farms - also rose briskly last year. The top 100 lenders in the field boasted $1.076 trillion of outstandings, up 16.2%. (See tables beginning on page 27.)
The data from Sheshunoff Information Services Inc., Austin, Tex., reflect a strong rebound in the industry's traditional business after the lean years surrounding the recession of the early 1990s.
"The credit crunch certainly is over; no one's arguing about that anymore," said Michael Mayo, a banking analyst at Lehman Brothers, recalling complaints that arose in 1990 about the unavailability of bank loans.
Mr. Mayo said the rise in commercial lending was all the more remarkable because it far outpaced growth in gross domestic product, which hovered around 2% last year. Commercial lending generally rises or falls in tandem with GDP, he said.
He added, however, that the gains raise questions about banks' attention to credit quality. "As analysts, we have to watch and make sure banks are not making the same mistakes as in the past."
Much of last year's runup stemmed from bank-financed acquisitions, such as the Westinghouse buyout of CBS, said a lender at a money-center bank, who requested anonymity.
"The M&A activity has a snowballing effect," he said, noting that the Westinghouse deal led to new financing opportunities when Westinghouse sold some of its businesses to Northrop Grumman. He said the trend is continuing this year.
Among bank holding companies, BankAmerica Corp. was the top commercial and industrial lender, with $47.9 billion of loans on its books at yearend. It was followed by Citicorp, with $47.5 billion, and NationsBank Corp., with $37.4 billion.
In the broader category of business lending, Citicorp snared the lead with $96.2 billion of outstandings. BankAmerica placed second with $83.1 billion, followed by NationsBank, with $64.6 billion.
Commercial real estate lending also surged, according to the data from Sheshunoff, an affiliate of American Banker. Banks' holdings of these loans rose to $422.3 billion, up 6.3%.
The gains in real estate lending included the first increase in construction and land development loans since 1989 - a 6.5% rise, to $68.7 billion - and the first increase in unsecured real estate loans since the Federal Deposit Insurance Corp. began tracking them in 1991. Unsecured loans on real estate rose 9%, to $19.3 billion.
NationsBank topped the ranking of real estate lenders, with $17.7 billion of loans, followed by BankAmerica, with $16.8 billion, and First Union Corp., with $16 billion.
