WASHINGTON — A significant proportion of bank loan officers say they are easing their lending standards for commercial and industrial loans, citing hotter competition and more certainty about credit conditions.

Almost a quarter of respondents to the Federal Reserve's Senior Loan Officer Opinion Survey, released Monday, said they were increasing limits of commercial credit lines for big firms.

“Notably, almost all domestic banks that reportedly eased standards or terms on C&I loans over the past three months cited increased competition from other lenders as a reason for easing,” the report said. “In addition, significant [numbers] of banks mentioned a more favorable or less uncertain economic outlook, increased tolerance for risk, and increased liquidity in the secondary market for these loans as important reasons for easing.”

Federal Reserve building.
Almost a quarter of respondents in the Federal Reserve's Senior Loan Officer Opinion Survey, released Monday, said they were increasing limits of commercial credit lines for big firms. Bloomberg News

More than 42% of the respondents in the second-quarter report said they were cutting their loan spreads for C&I loans to big firms, and nearly 30% said the same for smaller firms.

The news comes on the heels of brighter economic indicators in recent weeks. The Department of Commerce late last month announced that the second quarter’s gross domestic product topped 4% for the first time since 2014, while the Bureau of Labor Statistics reported on Friday that the unemployment rate had dipped to 3.9% after the addition of 157,000 new jobs in July.

But bank loan officers were not as enthusiastic about other loan categories. The survey found that bank lending for commercial real estate, or CRE, loans had either remained unchanged or tightened somewhat in recent months. The survey also found that more than 20% of respondents thought that demand for construction and land development loans had weakened in the second quarter. Nearly 30% thought demand for home equity lines of credit had declined over the same period.

Household loan demand was similarly sluggish. Terms for residential real estate were effectively unchanged from the first-quarter survey, as were terms for auto loans. A small number of respondents indicated that they had tightened their terms for credit card loans over the same period.

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