Banks reported higher demand for loans: Fed survey

Banks reported stronger demand for commercial and consumer loans in a variety of categories during the second quarter, a Federal Reserve survey found, suggesting a positive uptick in growth in the second half of the year.

Demand picked up for commercial, industrial and commercial real-estate loans as well as home-purchase, auto and credit card loans, according to the Fed’s survey of senior loan officers released Monday.

Overall, banks reported little change in their lending standards for commercial and industrial loans. However, on net, more banks reported easing than tightening of terms, especially for larger firms. Those banks that did report easing cited “more-aggressive competition” from banks and nonbank lenders as a key rationale. That same competition was also a commonly cited reason some banks reported weaker loan demand.

Banks reporting stronger demand for commercial and industrial loans cited a “wide range of customers’ financing needs” behind the demand, including mergers and acquisitions, investment in plants and equipment, and inventories, hinting that some firms feel confident enough to invest.

Home loan demand strengthened across most categories, including home equity lines of credit. “Modest” net fractions of banks reported easing underwriting standards on residential mortgages, especially for jumbo residential mortgages that conform to qualified mortgage rules put forth by the Consumer Financial Protection Bureau.