The cautious optimism about commercial lending that characterized the outlooks of many bankers in the fall is giving way to full-throated cheerleading this month as a lengthy list of institutions report solid fourth-quarter loan growth and tout burgeoning pipelines.
Robert Kaminski, president and CEO at Mercantile Bank in Grand Rapids, Michigan, called his $5.3 billion-asset company’s business-lending results “nothing short of stellar” on a conference call with analysts Tuesday. Two days later, Greg Carmichael, chairman and CEO of the $211.1 billion-asset
That scenario played out again at the $174 billion-asset Huntington Bancshares, which reported its fourth-quarter earnings Friday. The Columbus, Ohio, company posted a $377 million profit attributable to common shareholders, powered in large part by commercial loan growth that topped 4% on a linked-quarter basis. Huntington is also carrying an unusually full pipeline over into 2022, pointing to continued momentum, Chairman and CEO Stephen Steinour said.
“Normally, the year-end is like a cleanup period and it takes a month or two to regenerate,” Steinour said Friday. “We don’t have that now.”
“Commercial lending should fuel balance sheet growth in the coming year,” he added.
According to Steinour, Huntington, which reported commercial loans totaling $61.6 billion on Dec. 31, is benefiting from a renewed willingness to spend by companies that had husbanded their resources the past two years. Those looser purse strings were on full display Friday as the Fortune 500 company
“It will be a massive job creator,” Steinour said, adding that the activity would boost housing, transportation and small business.
“I think it's a bit of a game-changer for us,” Steinour added on a conference call with analysts. “We're going to have more than 10,000 construction jobs on that site and roadway and water expansion. Ultimately, there'll be 3,000 very high-paying jobs in the plant itself just with Intel.”
While Mercantile can’t point to anything as dramatic around its Grand Rapids headquarters, it saw its prospects as bright enough to issue $75 million of subordinated notes to “provide support for the strong loan growth we are expecting,” Kaminski said on a conference call.
Mercantile also paused its stock repurchase program to funnel even more capital to lending.
The company ended 2021 with core commercial loans totaling $2.91 billion, up 7% from the third quarter and 20% year over year.
With commercial lending heating up, it’s natural to point to credit quality as a potential concern, but Steinour said he hasn't detected any signs of a problem.
“We’re big indirect automobile lenders [and] we ran recoveries for the year — net recoveries," Steinour said, adding that he had never before seen indirect auto recoveries outpace charge-offs for a full year.
At Dec. 31, Huntington reported $716 million of nonaccrual loans, down from $977 million on June 30, just after it closed its
Like other CEOs, Steinour said some weakening from the current exceptionally strong credit-quality levels is inevitable. He just doesn’t think a softening trend is imminent.
“I personally don’t think 2022 is the year we return to norm," Steinour said. "I think this continues for a while."
Huntington is forecasting average loan growth in the high-single-digit range for the year, which could translate to portfolio growth approaching $10 billion. Steinour, for his part, is confident the company will hit its mark.
“This is a moment of significant growth for us,” Steinour said. “We’ve got the economy at our back, [and] interest rates are going up. There’s a lot of running room in front of us.”
