Monday, May 02, 2016

Fed Survey: Banks ease Standards on Residential Real Estate, Credit Quality in Oil Regions "deteriorated somewhat"

by Bill McBride on 5/02/2016 02:15:00 PM

From the Federal Reserve: The April 2016 Senior Loan Officer Opinion Survey on Bank Lending Practices

Regarding loans to businesses, the April survey results indicated that, on balance, banks tightened their standards on commercial and industrial (C&I) and commercial real estate (CRE) loans over the first quarter of 2016.3 The survey results indicated that demand for C&I loans had weakened and that demand for CRE loans had strengthened during the first quarter on net.

The first of two sets of special questions asked banks about lending to firms in the oil and natural gas drilling or extraction sector. The majority of domestic banks reported that loans to firms in this sector account for less than 5 percent of their outstanding C&I loans. In contrast, the majority of foreign banks reported that loans to firms in this sector account for more than 5 percent of their outstanding C&I loans. On balance, both domestic and foreign banks expect delinquency and charge-off rates on such loans to deteriorate over 2016 and noted that they were undertaking several actions to mitigate the risk of loan losses. In addition, on balance, banks indicated that the credit quality of loans made to businesses and households located in regions of the United States that are dependent on the energy sector had deteriorated somewhat.

Regarding loans to households, banks reported having eased lending standards on most types of residential real estate (RRE) mortgage loans, while demand for these loans strengthened over the first quarter. Modest net fractions of banks reported easing lending standards on credit cards and other consumer loans, whereas lending standards for auto loans remained basically unchanged. Over the first quarter, banks reported stronger demand across all consumer loan categories.
emphasis added