Banks' portfolios of consumer loans grew more slowly last year, after a setting a blistering pace in 1994, according to data compiled by the American Banker.
Analysts attributed the slowdown to a general faltering of consumer confidence in the face of rising debt burdens, delinquencies, and bankruptcies.
"We're at that stage in the economic cycle where, because of the consumer's debt burden, his propensity to buy things has slowed," said David T. Fronek, senior vice president, consumer lending services, at First Chicago NBD Corp. "That started showing up in late 1995."
"The rising delinquencies are a yellow warning light that makes lenders be just that much more cautious," said James Chessen, chief economist of the American Bankers Association.
Consumer loans held by commercial banks jumped 9.8% last year, to $1.2 trillion. The 1994 growth rate was 13%, the fastest rate in a decade.
Total bank loans, which includes commercial and consumer credits, rose 10.4% in 1995, to $2.6 trillion. For the first time in a decade, consumer loans - first mortgage, home equity, credit card, and auto - failed to grow faster than all loans.
Mr. Fronek said First Chicago NBD's internal forecasts of slower consumer loan growth in 1996 are being realized. "We're still doing reasonably well, but it's not as strong as it has been in past years," he said.
The American Banker statistics, which are compiled from bank reports to the Federal Deposit Insurance Corp., may understate the actual level of consumer lending, because of the industry's increased use of securitization. In securitizations, loans are packaged as securities and sold to investors, taking the assets off bank books.
Pools of securitized assets generated by banks, finance companies, and credit unions surged 44% in 1995, to $205.6 billion, according to Federal Reserve reports. The biggest jump came in revolving credit, mostly credit cards, which increased 51%, to $142.7 billion.
The Fed does not report the share of these pools generated by banks alone, but banks do hold 55% of all consumer installment debt.
Even with the securitization caveat, the overall trend points toward some moderation in consumer lending activity nationwide. Mr. Chessen links this with a peaking last year in consumer confidence, which had been rising since 1992.
The faltering of consumer confidence occurs against a backdrop of rising delinquencies, a rising ratio of debt to disposable income, and more personal bankruptcies. Mr. Chessen said that if nonbusiness bankruptcies continue at their current rate, they will reach a record one million this year, topping the 901,000 reported in 1992.
All these factors have combined to restrain consumer appetite for new loans, according to Mr. Chessen. "Consumers need to believe that they will be able to repay their loans when they're taking on new credit," he said.
The moderation of consumer demand can be seen most clearly in slower growth for credit card loans. Credit cards continued to set the pace for consumer lending by banks, with a 15% growth rate last year bringing outstandings to $216 billion. Card outstanding rose 22% in 1994.
Underscoring the growing concerns about credit quality in cards, the percentage of delinquencies increased to 1.56%, from 1.24%. By comparison, the noncurrent ratio for home equity and home mortgage lines declined. The ratio in the "other consumer" category, composed largely of auto loans, rose slightly, to 0.97% from 0.87%.
"When you hit a rough stretch of road, you tend to slow down until you're beyond that stretch," said Mr. Chessen, the economist. "That may certainly be what's happened to credit card loans over this period, as well as some of these other consumer loans."