Business activity in the banking sector expanded marginally in November, a sixth consecutive month of improved momentum, according to industry executives surveyed for American Banker's latest Index of Banking Activity.

The IBA's November overall reading of 55.8 compared to 55.7 in October. The IBA is a product of American Banker's regular surveys of bank executives and is published in partnership with VantageScore Solutions. The November index was based on 253 responses.

Hiring accelerated. The reading for staffing reached 52.1 in November, posting the highest tally for last year and rising from 46.6 in October. In contrast, optimism for business conditions cooled down, coming in a 53.9 reading from 57.8 a month earlier. Lawmakers reached a compromise in early January to stave off the fiscal cliff, so it will be interesting to see how that influences the next set of monthly data.

An accelerated pace of consumer loan applications also supported the higher reading. November's reading of 52.1 compared to 50.3 a month earlier. Approval for those readings reached 52, improving from 51 a month earlier.

Commercial lending, which set the tone for October's momentum, cooled off some in November. Applications for commercial loans registered a 55.3, compared to 60.1 in October. The reading for approvals fell to 57.5 from 59.35 a month earlier.

The IBA is a diffusion index. Readings above 50 in the composite indicate a monthly expansion of activity and readings below 50 point to contraction. (For contrary indicators, such as the components that track loan delinquencies and loan-rejection rates, a reading above 50 is considered evidence of deterioration in business activity.) The further from 50 a reading is, the stronger the indicated change.

Credit quality deteriorated at a slightly faster pace in November compared to a month earlier. Loan growth also slowed; November's reading of 58.9 compared with 69.3 in October. Several respondents in New Jersey and New York noted that they were still dealing with the aftermath of Hurricane Sandy, which slammed the Northeast in late October.

The composite index is a simple average of readings on a range of indicators based on responses to survey questions on topics that include volume and pricing trends in commercial and consumer lending, loan balances outstanding, and deposit account activity.

Executives are also asked about staffing levels at their institutions, as well as business and real estate conditions in markets where they do business. Every effort is made to make sure that the breakdown of companies included in the executive panel is representative of the industry on a number-of-institution basis.

Values for each component of the index are equal to the percentage of responses indicating increased activity plus one-half of those indicating "no change." Component scores are then averaged to arrive at a composite (when calculating the composite, contrary indicators such as delinquencies are scored inversely — the component figure is subtracted from 100).

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