Lending flat in May among top banks in bailout
NEW YORK — Lending among the biggest banks to receive government bailout funds was flat in May as the worsening recession led to efforts to pay off debt, the U.S. Treasury said.
As the economy continued to slide, consumer and business demand for credit weakened, said the report, released late Wednesday.
Total outstanding consumer loans, including mortgages, home equity lines, credit cards and other borrowing, was flat among the 21 banks surveyed.
The average total of all outstanding mortgages among the 21 banks was $914 billion in May, edging up from $913 billion in April.
“Households are facing growing pressures from a weakening labor market and the recent declines in their wealth,” Treasury said in a release. “In this context, consumers focused on paying down debt, driving the decreases in outstanding balances held by major banks.”
However, low interest rates and low home prices did encourage consumers to seek mortgages. Mortgage originations, or new loans, increased at 15 of the surveyed banks and fell at 3, for a total of $277 billion in new loans. The number is expected to fall in later months as interest rates began to rise at the end of May.
The total credit card outstanding balance fell 1 percent to $617 billion in May, from $622 billion in April. Of the 13 banks surveyed that offer credit cards, seven reported outstanding balances increased, while six saw declines. One bank’s increase in originations largely drove a 13 percent increase in new cards issued.
The total outstanding balance of other consumer lending products, including auto, student, and other consumer loans, decreased by 1 percent in May to $470 billion from $474 billion in April, with just four banks seeing increases and 14 reporting declines.
Like consumer loans, total commercial and industrial loans were also flat, at $1.22 trillion. Banks reported that demand for this lending was “well below normal levels,” Treasury said. With downsizing and cost cutting still on the agenda, banks expect demand will remain low.
Weak market conditions and general caution among business was cited for falling balances and lower-than-normal demand for commercial real estate loans. Rising office vacancies and a surplus in the commercial real estate market were also noted. The total outstanding was $537 billion, compared with $534 billion in April.
Overall, total originations rose by 1 percent, with 14 banks showing increases and 7 posting declines.
One bright spot was small business lending. The total outstanding balance of small business loans rose 1 percent, to $269 billion, from $267 billion in April. Originations gained 7 percent.
Since Treasury’s Capital Purchase Program was created, it has funded 651 banks of all sizes in 48 states, Puerto Rico and Washington, D.C.
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