WASHINGTON–The January 2017 Senior Loan Officer Opinion Survey on Bank Lending Practices (SLOOS) from the Federal Reserve found that loans to businesses during the fourth quarter of 2016, on balance, banks left their standards on commercial and industrial (C&I) loans basically unchanged, while tightening standards on commercial real estate (CRE) loans.
In addition, banks reported that demand for C&I loans from large and middle-market firms, alongside small firms, was little changed, on balance, while a moderate net fraction of banks reported that inquiries for C&I lines of credit had increased, the Fed said.
Regarding the demand for CRE loans, a modest net fraction of banks reported weaker demand for construction and land development loans and loans secured by multifamily residential properties, while demand for loans secured by nonfarm nonresidential properties reportedly remained basically unchanged on net, according to the Fed.
Regarding loans to households, banks reported that standards on all categories of residential real estate (RRE) mortgage loans were little changed on balance. The Fed said it found banks also reported that demand for most types of home-purchase loans weakened over the fourth quarter on net. In addition, banks indicated mixed changes in standards and demand for consumer loans over the fourth quarter on balance, the analysis found.
The survey included two sets of special questions addressing banks' outlook for lending policies and loan performance over 2017, the latter as measured by their outlook for loan charge-offs and delinquencies.
“On balance, banks reported that they expect to ease standards on C&I loans and for the asset quality of such loans to improve somewhat this year,” the Fed said. “In contrast, banks expect to tighten standards on CRE loans, while they expect the asset quality of most major CRE loan categories to remain unchanged on net. Regarding loans to households, on balance, banks reported that they expect to ease standards and to see asset quality improve somewhat for most RRE home-purchase loan categories. Furthermore, banks responded that they expect to tighten standards on auto loans and to see asset quality of both auto and credit card loans deteriorate somewhat over 2017.”