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WASHINGTON — Loan quality improved slightly over the past six weeks while demand was stable to weak, according to a report issued Wednesday by the Federal Reserve Board.
September 7 -
The central bank's survey finds improved loan demand in New York, Richmond and Chicago, while other areas lagged behind.
July 27
WASHINGTON — With no signs of improvement in the job market, consumers focused on reducing their mortgage debt and borrowing even less than usual from U.S. banks this past summer, according to a survey released by the Federal Reserve Board on Wednesday.
The central bank's "Beige Book" showed loan demand by consumers weakened across the country. The 12 District Banks surveyed said lending activity "moved lower" with the exception of a significant increase reported in mortgage refinancings as more homeowners took advantage of lower interest rates.
"Bankers anticipate continued low consumer loan demand due to high unemployment rates and ongoing deleveraging, which has accelerated with the recent surge of refinancings," bankers in the Philadelphia District reported.
Those same bankers also predicted total loan volume would only grow slightly for the rest of the year.
Bankers in Atlanta expressed growing worry as weakness in loan demand persisted during the three-month period as more consumers and business refrained from borrowing.
"Loan growth remains a concern for banks in the Sixth District," the report stated. "Lending levels continued to fall as new opportunities remained highly elusive and very competitive."
Similarly, the St. Louis District experienced depressed lending at small- and mid-sized banks during the period surveyed from mid-June to mid-September.
But it was not only consumers who were trying to reduce debt in light of economic concerns, the Richmond Fed reported.
"One commercial and industrial loan officer stated that the recent rise in economic uncertainty had caused several of his clients to pay down debt," the report stated. "Another banker reported that local auto dealers were borrowing less now, but were expected to increase their borrowing for new model year deliveries."
For the Kansas City District, bankers also experienced slight weakening across several loan categories.
"Overall loan demand decreased slightly as demand for consumer installment loans declined, while demand for commercial and industrial loans, commercial real estate loans, and residential real estate loans was marginally weaker," the report stated.
Bankers in Kansas City also reported a minor deterioration in loan quality compared to last year, but anticipated some improvement.
In the Dallas District, financial firms reported relatively flat loan demand with national banks reporting a modest increase and regional banks remaining level.
"The improvement in lending conditions noted in the last report has stalled, due to both the modest level of demand and more caution in supplying loans to anyone but the most creditworthy borrowers," the report stated.
In another bad sign, the Chicago District reported that credit conditions tightened even further than it had previously reported.
"Banking contacts noted softer business and consumer loan demand, as clients were pulling back on spending in light of increased risks coming from Europe and the weakness in U.S. economic activity," the report stated.
Separately, those in the financial services industry said conditions in the securities industry have "weakened noticeably" across all major business lines including sales & trading, underwriting, and IPOs in New York City.
"Declining profits, along with uncertainty about the regulatory environment, are reportedly causing firms to pull back on hiring and compensation; some layoffs are also anticipated in this industry the months ahead," the report stated.
