WASHINGTON — Businesses went knocking on banks' doors to ask for more loans over the past few months, boosting optimism that demand would continue to rise in the coming year, according to a Federal Reserve Board report released Wednesday.
"Most districts that commented on lending noted steady or slightly stronger loan demand," according to the central bank's survey of economic conditions known as the Beige Book.
Perhaps the most notable improvement came from the Federal Reserve Bank of New York, but other districts including Richmond also noted that the volume of small business loan applications was markedly higher than in the previous six weeks. Business loan demand appeared to be driven from the energy, healthcare and commercial real estate sectors, the report said. There was also a pickup for capital spending loans, according to several districts.
Bankers in the New York district said loan demand was on the rise with no changes to credit standards and further improvements in delinquency rates.
"Small- to medium-sized banks in the district report increased loan demand in all categories to a more widespread degree than at any time since the mid-1990s," according to the Fed's survey taken from early April to late May.
The spike in demand came largely from commercial loans and mortgages. There was also continued demand for refinancing, but not nearly as much as had been seen in recent months.
Improvements were also cited by the Philadelphia Fed, which reported steadier growth in lending and continued strong credit quality since the last Beige Book. Loan volumes also continued to increase.
"While activity remains uneven, banks report increasing signs of a steady recovery," according to the Fed's survey.
Demand appeared to be strongest for inventories and capital equipment for manufacturers and for investments in the higher education, health care, and technology sectors.
In the Cleveland district, the Fed's survey said that "demand for business credit is on the upswing." Requests for loans came across a number of sectors, but predominantly from commercial real estate, energy, and healthcare.
Several bankers also in the Richmond district cited significantly higher volumes of small business loan applications and increased loan approval rates.
"One banker attributed the gains to growth in inventory and capital improvement spending, while another said that small businesses were making renovations to commercial properties," according to the Fed's survey.
However, that was not the case for the Chicago district, where bankers noted an increase in economic uncertainty and weaker business conditions in Europe and Asia.
"Credit spreads and market volatility edged up," according to the Fed's survey. "Business loan demand remained limited apart from steady growth in refinancing and capital replacement."
Some of the larger banks in the district were able to offset weakness in business loan demand with foreign exchange hedging and liquidity management, according to the survey.
In the San Francisco district, banking contacts reported that overall loan demand edged up and there were slight improvements in credit quality.
"Although business remained very cautious in their capital spending plans, demand edged up a big further for new and commercial and industrial loans," according to the Fed's survey. "Furthermore, reports from most sectors suggested that capital spending is likely to increase modestly in the second half of the year compared with the first."
Banking contacts in the Kansas City district also reported slightly higher loan demand, improved loan quality and increased deposits.
"Overall loan demand was improving as most respondents reported stable to increased loan demand for residential real estate loans, commercial and industrial loans, and commercial real estate loans," according to the Fed's survey.
Most bankers also noted an improvement in loan quality compared to a year earlier, and with every banker expecting loan quality would be steady or improving over the next six months.
That view was also shared by bankers from the Dallas district.
"Outlooks are generally less pessimistic, and some outright optimistic, with an overall theme that 'loan demand is slightly stronger,'" said the Fed's survey.
But for the St. Louis district, a sample of large banks offered a mixed review of lending activity in the first quarter of 2012.
"Demand for commercial real estate loans ranged from unchanged to substantially stronger," according to the Fed's survey. "Meanwhile, credit standards for consumer loans ranged from basically unchanged to somewhat eased, while demand ranged from moderately weaker to moderately stronger."