Fed Beige Book: Loan Demand Steady, But Still Mixed

WASHINGTON — Lending by bankers to business and consumers remained steady over the most recent quarter, while some districts reported stronger demand for loans than others.

"Overall loan demand was steady in five districts, rose in four, and fell in one," the central bank said in the Beige Book, a survey of economic conditions in the Fed's 12 regional areas. "Credit standards were largely unchanged, except in two districts, where there were some signs of loosening."

The five districts — Philadelphia, Cleveland, Richmond, Kansas City and San Francisco — reported a "slight to moderate growth" in lending. Others like New York, Atlanta and Dallas reported stronger demand than from previous survey in November. St. Louis, for its part, said its lending declined slightly.

Bankers in New York reported "no change" in demand by small- to medium-sized banks across all loan types, except commercial mortgages, where loan demand rose. In the Philadelphia district, however, financial firms said loan volume continued to grow at a "slight pace" since the last survey by the Fed.

"A flurry of year-end business lending kept banks busy facilitating tax-oriented business decisions involving sales and liquidations, mergers and acquisitions, accelerated depreciation, and dividend payouts," according to the survey.

In Cleveland, bankers said demand had changed little across different industries and loan products, although some reported a rise in the number of applications for commercial real estate loans and refinancings. Several bankers also said their loan-to-deposit ratio was "much lower than desired."

Bankers in Atlanta said their loan demand had increased with some even taking steps to add lending specialists to deal with anticipated demand. "Competition for quality borrowers remained fierce and there was some indication that banks were more willing to increase their tolerance for risk," according to the survey.

In St. Louis, total lending at small and mid-size banks in the district decreased "slightly" — less than 1% — from early September to mid-December.

Meanwhile, bankers in Kansas City district said demand for both residential and commercial real estate loans were strong.

"Bankers, on average, reported stronger loan demand, improved loan quality, and higher deposit levels in the recent survey period," according to the survey. "Overall loan demand continued to strengthen, led by demand for residential and commercial real estate loans."

Financial institutions in the Dallas district reported "modest growth" in overall lending.

"The increase in corporate loan demand was mostly driven by customers opting to make purchases before year-end due to tax uncertainty, but there was also moderate growth in real estate lending activity," according to the survey. "Consumer lending improved, with modest growth in mortgage and new automobile loan demand."

Throughout the San Francisco district, banks reported that loan demand was "unchanged or up somewhat."

"Banking contacts continued to highlight ample liquidity and generally stiff competition among lenders to provide credit to well-qualified business loan applicants, with community banks facing increasing competition from larger national banks for small business lending," according to the Fed's survey.

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