Senior loan officer opinion survey for July

[Biggus Piggus]

Some highlights from the Fed's quarterly survey:

Most banks tightened lending standards and terms on all major loan categories, particularly consumer loans, over the previous three months.  For C&I and prime residential mortgages, standards tightened modestly, but commercial and nontraditional residential real estate lending standards moved more significantly.

55% of US banks expect to tighten lending standards for C&I loans further over the next six months, and 70% expect the same for commercial real estate loans.

60% of US banks tightened standards for C&I loans to large and midsized companies, 65% to small companies.

80% widened their loan rate spreads for C&I loans to larger companies, 70% to smaller companies.

Only 25% changed their lending standards because of current or expected capital position.  That means the other 35-40% did so due to concerns about the economy, or particular industries; due to less competition from other banks; due to lower risk tolerance in general; and/or due to less ability to sell loans in the secondary market.

80% tightened lending standards for commercial real estate loans, and demand for these loans fell off at the same time.

75% tightened lending standards for prime residential mortgages.  85% tightened lending standards for nontraditional (ARMs, Alt-A, etc.) residential mortgage loans.  Of the handful that still originate subprime mortgages, almost all tightened lending standards.

80% tightened lending standards for home equity lines of credit.  65% tightened lending standards for credit cards and other forms of consumer credit.  The main shift here is that most banks have raised the minimum credit score they will consider for credit cards.

Interesting to see that C&I loan demand increased modestly, and banks that had seen increased business did so because competing lenders had gotten too expensive.

C&I tightening is at a peak last seen just prior to the previous two recessions.  Commercial real estate loan tightening is worse than anything seen in decades, and consumer lending is the unfriendliest it has been since 1980.  I say that--all I'm going on is the % of lenders who are tightening.  Don't have the data to compare actual costs of borrowing.

[Masshog]

Were not good for each other Biggus.  I found the survey details chilling. 

[HognotinMemphis]

Speaking of tightening, I feel my a-nus tightening from all this financial tightening. What is the world coming to? A bunch of tight-arse Mr. Potter bankers?

[Biggus Piggus]

Speaking of tightening, I feel my a-nus tightening from all this financial tightening. What is the world coming to? A bunch of tight-arse Mr. Potter bankers?

My boss, a veteran bank watcher, tells me bankers are reactive, still pinching pennies well after the economy has turned.  If we're at cyclical extremes in banker sentiment, might be a good thing.