Banking companies provided U.S. businesses with record amounts of capital last year.
Commercial loans by the nation's 50 largest business lenders soared 13.34% in 1998, to $1.38 trillion, according to data compiled for American Banker by Sheshunoff Information Services.
That surge is more than double the growth in bank business loans at these lenders the previous year.
Lease financings showed the strongest gain, jumping 24% for all banks and 26% for the top 50.
As a result, business loans as a share of all loans by banks reached 61% in 1998, compared with 59% the previous year.
The increase suggests that banks continued to shift capital away from a saturated consumer market and toward America's booming business economy. Banks are increasingly selling off consumer debt in the form of securities known as collateralized loan obligations.
"The balance sheet of the American corporation is lighter on debt than for most consumers," said Jim Glassman, senior U.S. economist at Chase Securities Inc. U.S. business "looks like an attractive place for banks to go. If you look at terms of lending they're not getting lax-this is demand- driven.
Mr. Glassman cautioned, however, that 1998's sharp lending increase was most likely influenced by tumult in the capital markets during October and November. Many companies were deflected from the bond market into bank loans for financing, he said.
"We had an explosion of bank lending to business during that time," he said. "By December the whole thing came unwound. The capital markets have reopened, and lending, I think, has been flat for most of this year."
Nevertheless, 1998 was a good year for business loans. Led by Bank of America Corp., with $208 billion, all but three of the nation's top 50 banking companies increased commercial and industrial loans, real estate, lease finance, or other types of business credit.
Only Wells Fargo & Co. (down 0.63%), Republic New York Corp. (down 0.12%), and J.P. Morgan & Co. (down 19.94%) saw business lending decline from the previous year.
A shrinking of on-balance-sheet business at J.P. Morgan, the steepest among the top 50 banking companies, did not come as a surprise. In recent years, the bank has been moving away from buy-and-hold lending, which generates interest income, in favor of fee income derived from originating and selling loans and securities.
True to this form, even though Morgan had a record year in syndicated loan originations, with 111 deals worth $106 billion, it put only $23.5 billion of new business loans on its balance sheet in 1998, Sheshunoff said.
Douglas A. "Sandy" Warner, J.P. Morgan's chief executive, said on June 8 that his company is ahead of schedule in meeting its goal to reduce regulatory capital loans on its balance sheet by 50%. However, business loans still dominate the bank's overall portfolio, comprising 92% of all loans.
The survey report "is consistent with our strategy to provide liquidity to our clients and to securitize or sell parts of loans in the secondary market," said Michael F. Golden, a J.P. Morgan spokesman.
Banking companies with the biggest increases in business lending included Birmingham, Ala.-based Compass Bancshares, 38.93%; HSBC Americas Inc., based in Buffalo, 38.39%; and Hibernia Corp., based in New Orleans, 30.37%.
For HSBC-which had a 365% gain in lease financing-and Compass, the increases were partly due to mergers completed last year. The Sheshunoff survey uses pro forma results.
In fact, mergers affected results for 22 of the top 50 lenders, including the top three business lenders: Bank of America, Citigroup Inc., and Bank One Corp.
Mergers let some banks take significant jumps up the ladder, especially National City Corp. in Cleveland, which moved from 22d to 14th place, on an 11.84% increase, to $29.8 billion, after buyouts of Fort Wayne National Bank and First of America Bank Corp.