Fall is edging closer, but the summer doldrums will linger.
With less than three weeks to go in the third quarter, several big-bank executives expect to report lackluster loan growth next month because demand for commercial credits, in particular, continues to wane.
The projections, shared at an industry conference in New York on Tuesday, point to yet another flat quarter as banks wait for interest rates to rise. Business lending — a key revenue driver at regional banks — is largely predicted to hold steady from the prior quarter, though consumer and personal lines of credit are showing more positive signs, bankers said.
"Frankly, the lending market is challenging in the marketplace today," said Kelly King, chief executive of BB&T in Winston-Salem, N.C. He described commercial lending, in particular, as "a little slower than expected."
BB&T's loans are expected to grow by 1% from the prior quarter, down from prior forecasts of as high as 3%, he said.
The commentary — echoed by other bankers at the Barclays Global Financial Services Conference — suggests that the trend of slow-and-steady growth will continue into the near future.
Industrywide loan balances were $181.9 billion at June 30, up just 2% from three months earlier, the Federal Deposit Insurance Corp. said last month.
Banks have faced numerous challenges as they seek to boost commercial lending in a tough environment.
Earlier this summer the White House budget office scaled back its projections for economic growth, saying that gross domestic product — which goes hand in hand with loan growth — will rise by 1.9% this year, compared with initial expectations of 2.6%.
Corporate profits are also under pressure across a number of sectors — agriculture, construction and, of course, energy — contributing to a recent uptick in nonperforming commercial loans.
"The competition is fierce," King said.
At the $217 billion-asset BB&T, a recent increase in payoffs has been a drag on commercial lending as more companies access funding through the public markets, according to King.
But King added that there are signs of a "huge pent-up demand" across the market, citing his recent conversations with major clients. Once the economy starts growing at a stronger clip, and apprehension associated with the elections subsides, the demand for credit will likely turn around.
"I think you will see some renewed confidence on the business side," King said.
During the conference, a number of high-profile CEOs warned investors to simply expect more of the same from recent periods.
Ralph Babb, chairman and CEO of Comerica, described loan growth as "stable" compared with the second quarter.
Average loans at the Dallas company were $49.4 billion as of Aug. 31, on par with the end of the second quarter, Babb said during his presentation.
Comerica is in the midst of a turnaround effort — and its flat loan growth reflects an ongoing remixing of its balance sheet. The company has scaled back its struggling energy business, while also expanding commercial real estate loans.
Similarly, Greg Carmichael, CEO of Fifth Third Bancorp in Cincinnati, said that the company has noticed "softness on the [commercial and industrial] side of the house," citing a recent report from the Federal Reserve that indicated weak demand nationwide.
Some big-bank executives, however, were more optimistic. Beth Mooney, CEO of the $99 billion-asset KeyCorp, reiterated her guidance for mid-single-digit loan growth for the year, citing strong results in agricultural loans in particular.
And Wells Fargo said that widespread caution on commercial lending may give the San Francisco megabank an opportunity to gain market share.
"Even if the market C&I growth is flat, we can still compete against our peers and try to take their customers away," said John Shrewsberry, chief financial officer at Wells Fargo.
Some banks said that consumer loans are poised to increase in the coming months.
For instance, Fifth Third on Tuesday announced an agreement with GreenSky, an alternative lender, to provide unsecured personal loans for home improvement and other needs.
As part of the agreement, the $141 billion-asset Fifth Third made a $50 million equity investment in GreenSky. It intends to use the upstart firm's technology to originate new loans and streamline back-office processes.
Fifth Third expects the partnership to produce $100 million in new consumer loans per quarter, Carmichael said.
Similar agreements with GreenSky and other online lenders have benefited regional banks. Regions Financial, for instance, has reported a spike in indirect consumer lending as a result of its agreement with the upstart firm.
"It's more than just an asset play for us," Carmichael said, describing the company's embrace of new lending technology.