Fed survey reveals strengthening loan, credit card demand

Demand for commercial and industrial lending grew in the first quarter of this year as customers spent on inventory and plant or equipment projects, according to the Federal Reserve’s April Senior Loan Officer Opinion Survey on Bank Lending Practices.

 Between 10 to 20 percent of banks reported stronger demand for C&I loans and saw more inquiries from potential borrowers on the potential terms and availability of new credit lines or increases in existing lines.  

The survey, which included responses from 68 domestic banks and 21 U.S. branches and agencies of foreign banks, revealed that C&I lending standards remained mainly unchanged, after they were consistently eased for the previous four quarters. According to the Fed, many of the banks that eased lending standards or terms cited competition as a major reason. Others cited “improvement in industry-specific problems, a more favorable or less uncertain economic outlook, and improvement in their current or expected liquidity position.”  

Demand remained mainly unchanged for construction and land development loans and nonfarm residential loans. Senior loan officers that saw more demand for commercial real estate loans said the growth was fueled by a more favorable outlook for the rental market and an increase in customers’ acquisition or development of properties. 

“Banks reportedly eased some lending terms across all CRE loan categories, including the maximum loan size and maturity, the spread of loan rates over their cost of funds, the length of interest-only periods, and the market areas served,” the Fed stated.

Other report findings included:

  • A “significant” share of banks reported stronger consumer demand for credit card loans over the first quarter, and a “moderate” share saw stronger demand for auto loans and other lending. 
  • Banks eased credit card and auto loan standards. “A moderate net share of banks also reported having eased credit limits and the extent to which loans are granted to some customers that do not meet credit scoring thresholds,” the Fed stated. 
  • Banks experienced less demand for residential real estate loans in the first quarter but saw stronger demand for home equity lines of credit. “Significant net shares of banks reported weaker demand for all residential real estate loan categories other than subprime residential mortgages, for which moderate net shares reported weaker demand,” the Fed said.