The American Banker article published March 13 titled “
The solid loan growth at commercial banks in recent years has been
Furthermore, loan categories to sectors most dependent on bank credit — small-business lending as well as home equity lines of credit, home mortgages and credit cards for households with less than pristine credit scores — have grown slowly or even contracted. For instance, small-business loans outstanding on banks’ books were about unchanged since the enactment of the Dodd-Frank Act in 2010. Small commercial real estate loans, which account for approximately half of small-business loans outstanding on banks’ books, declined about 2% on average over the past five years. In addition, as discussed in the article "Two-speed Economy Still Runs on Two Tracks," in
For mortgage lending the growth rate averaged about 3% over the same period, as the American Banker article notes; however, the distribution of borrowers is clustered at the top of the range of credit scores, and those with lower scores have very low chances of obtaining a mortgage.
The article also points out that mortgage rates are relatively low, which is driven by the very low level of interest rates. But, as shown in the Banking Perspectives article cited above, spreads on mortgages loans have risen for borrowers across the entire credit spectrum. In particular, loan spreads on jumbo mortgages and mortgages insured by the Federal Housing Administration and the Department of Veterans Affairs are almost 50 basis points higher than they were prior to the past recession.
Finally, it may be worth noting that aggregate annual loan growth on banks’ books slowed appreciably over the past four months: It was 2.6%, negative-1.3%, 0.8% and 0.6% for November through February, respectively. While this data is not cause for alarm, earlier growth against a low base is not cause for complacency.