Lately, banks of all sizes have been pointing fingers at one another, claiming the other guy has been offering irrational prices and cutting corners to compete for business loans.

It’s easy to see why the accusations are flying. Amid sluggish loan growth overall, more banks have been saying they’ve been easing credit standards than tightening them for more than three years. The majority of banks have been saying they’ve been progressively reducing the spreads between interest rates they charge and their funding costs over the same time.

Which banks in particular have been the most aggressive? Data on yields and growth for portfolios of commercial and industrial loans offers some perspective. (The following graphic shows trends for individual banks among a group with more than $50 billion of assets on two tabs. Interactive controls are described in the captions. Text continues below.)

Among a dozen publicly traded banks with more than $50 billion of assets, C&I yields fell particularly sharply at companies like SunTrust (STI) and PNC (PNC) between the first quarter of 2012 and the first quarter this year — a contraction of 66 basis points to 4.2% at SunTrust and 48 basis points to 4.03% at PNC.

Over the same time, average C&I loans grew briskly at PNC — by 20% to $83 billion — but relatively slowly at SunTrust, by 9% (below the group median of 12%) to $54 billion.

In absolute terms, yields at SunTrust and PNC have held above the group median for the past few years.

There is no straight line between yields and growth and competitive stance, to be sure. What might appear to be aggressive pricing could instead reflect things like acquisitions — which may involve the fusing of loan portfolios with different risk and yield profiles — and accounting for impaired assets. Both those factors were at play at PNC, for instance, which completed its acquisition of RBC Bank in March last year. (RBC Bank had $2.5 billion of commercial and industrial loans as of yearend 2011, compared with the $14 billion growth in the average size of PNC’s portfolio during the year through the first quarter of 2013.)

Besides, yields say nothing about the other half of the picture: whether banks are lending to borrowers with poorer credit quality, or cutting slack on other loan features, like maturities.

Echoing intensifying regulatory scrutiny of the leveraged loan market, analysts at JPMorgan raised concerns about rapid growth in leveraged loan volume at banks like Fifth Third (FITB) and Regions (RF) in a report this month.

Alarm has been triggered by a surge in activity and a comeback in “covenant-lite” deals, or loans that impose fewer conditions on borrowers, like prohibitions against taking on additional debt.

The JPMorgan analysts reckoned yield-hungry banks could be retaining 10% to 40% of syndications they arrange on their balance sheets. Despite the bull market in the paper — and hence narrowed spreads — that sort of practice could buoy portfolio yields, since rates for higher credit-quality borrowing are lower.

C&I yields at Fifth Third and Regions have hewed closely to the group median over time; the contraction at each bank in the year through the first quarter was also close to the group median.

Broadly, the case for a bubble in bank lending to businesses is hazy. Aside from a slow first quarter, C&I growth has generally been strong since 2011, but quarter after quarter of double-digit annualized increases have only brought total loans outstanding back to about the level they reached before a slump began in late 2008. C&I yields are low mostly because yields everywhere are low because of the soft economy.

Still, declarations that bankers are uncomfortable with the competitive environment are troubling, and the risks in the loans that are being written today may not become apparent for years.

 

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