The Year in Lending
January 2, 2013 3:16 PM
Loan volume built on the turnaround that began in 2011. Business borrowing continued to lead the way, though momentum appeared to weaken as the year wore on. Meanwhile, other major loan categories notched gains for the first time in years, and mortgage production delivered large profits.
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Lending Lags Securities Growth
Loan volume expanded in 2012, building on the resumption in growth that began in the second quarter the year prior. Increases in holdings of securities and cash continued to outpace lending, however.
Business Borrowing Leads
Loan growth was concentrated among business borrowers again in 2012. Commercial real estate portfolios, which had been depleted by a bust in construction lending , notched their first increase since 2008.
Spark in Households
Single family mortgages and consumer loans on bank balance sheets both showed gains in 2012 , though credit card balances remained roughly flat. (The growth in consumer loans in 2010 reflects the consolidation of securitized credit card assets under new accounting rules.)
Cracks in C&I Outlook
Though business lending continued to increase much faster than any other major category, growth appeared to slow in the second half. Meanwhile, demand appeared to stagnate and price competition has been fierce .
CRE Demand Firms
As commercial real estate lending has turned out of its nosedive , banks have reported that demand has continued to ratchet higher.
Low Loans to Assets
Overall, loans dropped almost 7 percentage points from 2002 to 52% of total bank assets as of the third quarter. Cash increased more than 4 percentage points to about 9%, largely reflecting reserves created as a part of the Federal Reserve's effort to boost the economy by buying bonds.
Mortgage Boom
The mortgage business was a bright spot for banks in 2012 as production accelerated and the spread between consumer rates and secondary market rates — a proxy for profitability — blew out. Lenders faced criticism that they wield unfair power over pricing , however, and questions over what will replace mortgage earnings once originations slow.
