News
Treasury Releases April Monthly Bank Lending Survey
WASHINGTON— The U.S. Department of the Treasury today released results from its monthly bank lending survey for April with data from the top 21 recipients of government investments through the Capital Purchase Program (CPP).1 The April survey, which includes new information on small business lending that will be reported in all surveys going forward, found a slight decline in outstanding loan balances and modest deceleration of new loan originations in the 21 banks surveyed.
Treasury’s fifth survey of banks’ activities was conducted as the economy continued to weaken in April and May, although there were increasing signs that the pace of economic decline was easing and some sectors were stabilizing. Job losses in April and May averaged about 425,000, after averaging nearly 700,000 in the first quarter. Single-family housing starts and home sales have stabilized since January. Consumer optimism moved decidedly higher in April and May, and rose to the highest level since September 2008 -- before the financial crisis intensified -- according to the University of Michigan survey. Financial pressures eased further in April and May, short-term credit spreads have retreated and securitization continued to improve. Despite these signs of improvement, other indicators pointed to further worsening: home foreclosures and delinquencies set another record in Q1, with more than 9 percent of all mortgages at least 30 days delinquent.
The April lending survey results show that, in the consumer lending category, total outstanding loans in all four categories – first lien mortgages, home equity lines of credit, credit card loans, and other consumer loans – decreased in April by 1 percent overall. Households are facing growing pressures from a weakening labor market and further declines in their wealth. In this context, consumers focused on paying down debt, driving the decreases in outstanding balances held by major banks. In addition, total used and unused commitments for both credit cards and home equity lines of credit were flat in April in contrast to the decreases these categories showed in the four prior lending survey periods.
Banks reported that demand by businesses for commercial and industrial (C&I) loans was well below normal levels and the outstanding stock of total C&I loans to businesses fell 1 percent in April. This decline was attributed to lower demand among businesses for capital expenditure loans and for loans to finance acquisitions, plants, equipment, inventories and accounts receivables. As firms continue to downsize, cut costs, and reduce inventories, banks anticipate that lower levels of demand for C&I loans will persist through the second quarter of 2009.
In the commercial real estate (CRE) sector, the April survey results point to continuing poor market conditions and general caution by businesses. While CRE loan balances at these 21 banks were flat, banks reported that demand for CRE loans remained well below normal levels, as businesses continue to focus on strengthening their balance sheets, reserving for future losses, and downsizing. Additionally, the lower demand for new loans reflected a surplus in the market, as the supply of office space has increased due to firms downsizing and office vacancies rising. The Federal Reserve publishes weekly estimates of the main elements of commercial bank balance sheets, and the Fed's estimates suggest that large U.S. commercial banks continued to reduce their holdings of C&I and CRE loans in late May and early June.
Originations of nearly all categories of loans decreased in April from their March levels, with two categories showing increases in originations. The median growth in total loan originations was -7 percent in April, with six banks posting increases in loan originations and 15 banks reporting declines.
The April survey also collected new information on small business lending. Respondents reported that in April 2009, outstanding balances for small business loans totaled roughly $267 billion, while small business loan originations totaled roughly $8 billion.
Through the CPP, Treasury invests in viable banks to stabilize the financial system by building up the capital bases of banks, enabling continued lending and economic recovery. Strong capital levels enable banks to continue to play their vital roles in our communities as providers of credit to businesses and consumers. Since the inception of the CPP, Treasury has funded 623 banks of all sizes in 48 states, Puerto Rico and the District of Columbia.
- Tables
- The Monthly Lending and Intermediation Snapshot, 06/15/09
- Individual Banks' reports, 06/15/09
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With about $4.2 trillion in net loans and leases outstanding in March 2009, these banks account for more than half of the net loans and leases outstanding in depository institutions.
