WASHINGTON—The Federal Reserve's fourth-quarter senior loan officer opinion survey revealed that banks entered the year expecting relatively stable loan demand and performance, despite some anxieties related to subprime consumer loans.
According to the Fed analysis, on loans to businesses banks indicated that, on balance, they left their standards basically unchanged on commercial and industrial (C&I) loans to large and middle-market firms, while standards eased for such loans to small firms. Most terms were reportedly eased on C&I loans across firm size categories.
In addition, banks reportedly tightened standards over the past three months across all three major commercial real estate (CRE) loan categories—construction and land development loans, nonfarm nonresidential loans, and multifamily loans, banks reported.
Meanwhile, banks reported basically unchanged demand for C&I loans from large and middle-market firms and weaker demand from small firms. Loan demand for construction and land development loans reportedly weakened, while demand for other CRE loan types remained basically unchanged during the same period, the Fed reported.
Loans to Households
For loans to households, banks reported standards on credit card loans tightened, on net, while standards reportedly remained basically unchanged on auto loans and most categories of residential real estate (RRE) loans. Banks reported stronger demand for credit card loans, auto loans, and almost all categories of RRE loans.
“Banks also responded to a set of special questions inquiring about the current level of lending standards relative to the midpoint of the range over which banks’ standards have varied since 2005,” the Fed said. “Banks, on balance, reported that their lending standards on C&I loans are currently at the easier end of the range of standards between 2005 and the present. For CRE loans, most RRE loans, subprime credit card loans, and subprime auto loans, banks reported currently having relatively tighter levels of lending standards on net.”
The Fed went on to say that on balance, significant net shares of banks reported that the levels of their standards on both auto and credit card loans to subprime borrowers are currently at the relatively tighter ends of their respective ranges since 2005.
‘Tighter End of Range’
“However, standards are reportedly around the midpoint of the historical range both for credit card loans and auto loans to prime borrowers and for consumer loans other than credit card and auto loans,” the Fed said. “On net, this year’s responses on banks’ current levels of lending standards for credit card and auto loans are generally in line with those reported in the July 2018 survey. However, the net shares of banks reporting that their standards for subprime credit card and auto loans are currently at the tighter end of the range since 2005 have declined relative to last year.”