LAKE FOREST, Ill.—When it comes to getting a loan, consumers and small businesses are still feeling the impact of the Great Recession, according to a new study that shows bank, thrift and CU loan-to-asset ratios have not come back since the economy faltered.
But that isn’t true in all cases: the report from Moebs $ervices also shows that efficient banks and thrifts in certain asset categories are the only ones to have improved their lending positions.
Using their respective 2006 loan-to-asset ratios as a benchmark, banks are down 4.84%, thrifts are down 8.59%, and credit unions are down 3.25%.
“One could say that 2006 represents an excess loan level,” said Michael Moebs, economist and CEO of Moebs $ervices. “However, if you talk to a consumer seeking a personal loan or a small business owner looking to fund their business, they would tell you differently. The sluggish economic growth since 2006 supports their perspective.”
Some Have Come Back
While no credit union asset group shows full recovery, certain asset size groups of banks and thrifts that have come back, said Moebs. Banks between $5 billion and $50 billion in assets exceed 2006 levels. Thrifts between $500 million and $10 billion in assets have also exceeded 2006 lending levels.
The Moebs study shows that banks and thrifts, especially between $5 billion and $25 billion in assets, have exceeded their 2006 levels.
“These financial institutions are at their economy of scale in the depository business,” said Moebs. “They consist of efficient lenders – defined as low non-interest loan costs, fees for time spent in loan origination and maintenance, and low interest rates supported by low-cost funds. These are the financial institutions who lend to small business and savvy consumers. Even though the economy is still in the doldrums, if more financial institutions would adopt the efforts of the efficient, the depository business and economy would be better off.”
Small Business Lending Is Key
The key to lending in 2017, according to Moebs, will be what happens to small business lending.
“Small businesses produce over 60% of the jobs in America, according to several Federal Reserve studies,” said Moebs. “In recent surveys, small businesses are optimistic that economic conditions will improve in 2017, driven by a period of business-friendly policies under a new administration in Washington. If banks and credit unions will adjust underwriting to reflect a positive economy, 2017 will be a green lending year.”