WASHINGTON — Businesses around the country appeared more willing to apply for loans in the final quarter of last year, a modest sign that lending may be picking up, according to a report released Wednesday by the Federal Reserve Board.
"Lending activity edged up overall, primarily due to increased loan demand by businesses," according to the central bank's latest survey of economic trends known as the Beige Book.
Most of the 12 Districts surveyed said lending activity showed little or no change in overall loan demand in the fourth quarter. But those that did pointed to "increases rather than decreases" in lending although it varied based on the type of loans, the Fed said.
For example, both the New York and Cleveland districts reported a surge in demand for commercial mortgages, while the Dallas and San Francisco districts said they saw a slight gain in commercial and industrial lending.
Some districts — New York, Philadelphia and Cleveland — also reported a growing demand or continued demand for refinancing of residential mortgages, a trend from previous quarters.
Despite the boost in demand, however, lending standards were largely unchanged across all lending categories with some districts experiencing some tightening.
Credit quality improved in many districts. New York reported a decline in delinquency rates for all loan categories, while Philadelphia, Richmond, Kansas City, Dallas, and San Francisco all reported general improvement in loan quality.
Following is a breakdown by selected districts:
New York — Bankers in New York reported increased loan demand in all loan categories with the exception of consumer loans, which stayed the same.
"The increase was most prevalent for commercial mortgages where four times as many bankers reported rising than falling demand," according to Fed's report. "Respondents also indicate widespread increases in demand for refinancing."
There were reports of some tightening of credit standards, especially with commercial and industrial loans, but no banker reported any easing of standards.
Philadephia — The Philadelphia district also said they anticipated slow growth in 2012.
While overall volume continued to grow since the previous quarter, "many bankers reported difficulty maintaining loan volumes," according to the Fed's report.
The strongest pockets of growth came from home mortgages, including refinancings and some improvement in credit quality.
Philadelphia "bankers expressed several concerns, including Europe's economic problems, a lack of recovery in the housing market, uncertainty and a lack of confidence with Washington, and uncertainty over the renewal of federal contracts," the Fed noted in its report.
Cleveland — In the Cleveland District, demand for business loans was characterized as either stable or increasing, with requests being driven by commercial real estate, notably multifamily housing and healthcare.
"Activity in the residential mortgage market has been solid in the fourth quarter, driven by low interest rates," said the Fed's report. "Most applicants are looking to refinance."
Richmond — The mood in the Richmond district, however, was decidedly more downbeat. Bankers reported that lending continued to be weak with the exception of commercial loans.
One West Virginia banker reported that "local lending was weak with no increase for some time," while another South Carolina banker pointed to a decline in the number of outstanding loans.
"Several bank officials attributed weak loan demand to a lack of confidence on the part of businesses," said the Fed's report. "However, a number of commercial developers noted greater difficulty getting their loans approved."
Atlanta — In Atlanta, bankers said that deposit growth continued to outpace loan demand.
"Liquidity levels at depository institutions remained high as many banks reported strong deposit growth coupled with continued weak loan demand," said the Fed's report.
Some bankers even said they cut loan prices to attract new customers and offered loan concessions proactively to retain existing clients.
While bank officials also saw little demand for new housing loans, they did see an up tick in refinancing and auto loans.
Chicago — In Chicago, credit conditions remained the same compared to the previous quarter.
Business loan demand remained "subdued," while credit lines for businesses were up only a little bit.
"Lenders continue to see their clients' balance sheets growing stronger, they speculated that uncertainty about future business conditions was restraining the demand for credit," according to the Fed's report.
St. Louis — In St. Louis, overall lending at a sample of small and mid-sized district banks declined in the three-month period from mid-September to mid-December.
Kansas City — In Kansas City, banks in the district reported generally steady loan demand for commercial and industrial loans, commercial and residential real estate loans, and consumer installment loans.
"Almost all bankers reported generally steady loan demand, stable or improving loan quality, and increased deposits," according to the Fed's report.
Credit standards remained largely unchanged in all major loan categories and deposits increased for the eight straight survey.
Dallas — Financial services respondents in the Dallas District said overall loan demand was flat to up slightly.
"National banks noted a pickup in both middle- and large- market corporate lending activity," said the Fed's report. "Regional banks said loan demand was mixed, with strength in energy-related lending and weakness in other loan activity."
San Francisco — In the San Francisco District, financial institutions reported a slight increase in business loan demand, but said that consumer loan demand remained steady.
"Reports from district banking contacts indicated that loan demand improved a touch relative to the prior reporting period," said the Fed's report.
According to bank officials, lending standards stayed relatively restrictive for many types of business and consumer loans, despite further modest improvements in overall credit quality.
