C&I lending looking up in 2017: Fed

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WASHINGTON — Banks expect demand for commercial and industrial lending to improve moderately in 2017, while they may have to tighten standards for certain commercial real estate and consumer loans, according to a survey released Monday by the Federal Reserve.

In the published results of the Fed’s quarterly Senior Loan Officer Opinion Survey , lenders said they expected overall demand and delinquency rates to be fundamentally unchanged in 2017, barring any unforeseen economic changes. Demand and performance are also likely to remain unchanged, according to the survey.

But several lenders said they expect the prospects of C&I loans to improve.

Of the 66 banks surveyed, more than 16% said they expected the rates of chargeoffs and delinquencies of large syndicated C&I loans to decline and over 18% said they expected the same for middle-market C&I loans. Correspondingly, roughly 15% of banks surveyed said they expected to ease lending standards for large C&I loans (though spreads for such loans would likely remain the same) and almost 18% expected to ease lending standards for small firms. Of the banks surveyed, 20% expected the spreads for C&I loans to small firms to increase somewhat.

By contrast, residential and commercial real estate lending standards are likely to tighten in 2017, according to the survey. Of the 67 responding loan officers, more than 44% expected to tighten lending standards for loans secured by multifamily residential properties. More than 31% said they expected to tighten lending standards for construction and land development loans, and another 17% expected to tighten loans secured by residential nonfarm properties.

The survey similarly found that lenders “expect to tighten standards on auto loans and to see asset quality of both auto and credit card loans deteriorate somewhat over 2017.”

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