Top executives at Bank of America and Wells Fargo warned Tuesday about the weak outlook for commercial lending, even as they touted the continuing strength of U.S. consumers.
Their comments were consistent with survey results about bank lending practices that were released Monday by the Federal Reserve Board.
The Senior Loan Officer Survey found banks reporting weaker demand for commercial and industrial loans for the fifth consecutive quarter. Demand for commercial real estate loans has diminished for 12 quarters in a row, according to the Fed’s survey.
BofA Chairman and CEO Brian Moynihan said Tuesday that loan demand is solid at small and midsize businesses, but that larger firms are more worried.
“When you get to people who are more involved in the international questions of trade and things, the worry wall gets higher,” Moynihan said in remarks at a conference in New York. “They’re more involved in getting revenue from China and the slowdown that’s going on there.”
John Shrewsberry, the chief financial officer at Wells Fargo, struck a similarly bearish note. He cited both weaker demand at U.S. businesses and the bank’s caution about CRE lending. “Late cycle, we tend to be in some markets a little bit more circumspect,” Shrewsberry said in remarks at the same conference.
Still, Shrewsberry said that business loans continue to perform well for Wells Fargo. And he offered a rosier outlook in consumer lending. He cited opportunities for growth in both the mortgage business, where lower interest rates have boosted demand, and in auto lending.
“We like the risk-adjusted returns,” he said.
The Fed’s survey found stronger consumer demand for residential mortgages, credit cards and auto loans.
Some observers believe that the chance of a recession has risen, but Moynihan noted that U.S. consumers continue to spend money.
“The consumer is doing fine,” he said. “About $3 trillion of spending goes through our customer base every year.
And that’s ATM cash that goes out into the economy, it’s payments for bills, it’s the credit and debit card.”
