Descriptions such as “modest” or “slowed” regarding loan demand or activity at financial institutions appeared most often in reports from the 12 Federal Reserve Banks outlined in the latest Beige Book released Wednesday by the Federal Reserve.
“Strong” and “increased” described loan demand or activity in their regions by two of the dozen central banks, but the others for the most part wouldn’t go that far. Two of the 12 banks did not include specific reports about financial services or banking and finance in their reports.
With regard to credit quality, responses were mixed among the banks: at least one reported “tighter credit standards,” while at least another reported that financial institutions in the district were “starting to loosen underwriting standards.” At least one other reported credit quality standards were unchanged, and at least one other reported “no signs of credit quality deterioration.”
Following are reports from 10 Federal Reserve Banks about financial services and banking in their regions from the Oct. 24 Beige Book:
Federal Reserve Bank of New York
Banking and Finance
Small to medium-sized banks reported lower demand for consumer loans and residential mortgages, but steady demand for commercial mortgages and C&I (commercial and industrial) loans. Banks reported tighter credit standards for commercial loans and mortgages but unchanged standards on household-sector loans. Loan spreads widened for residential and commercial mortgages. Finally, bankers reported a rise in delinquency rates for residential mortgages but unchanged rates for all other categories.
Federal Reserve Bank of Philadelphia
Financial firms continued to report modest growth in overall loan volumes on a year-over-year basis (excluding credit cards). During the current period, loan volumes grew at a slightly slower pace than during the same period last year. Volumes (reported without seasonal adjustments) grew moderately in mortgages, in autos, and in other consumer loans (not elsewhere classified). However, these gains were offset by slight declines in home equity lines and by modest declines in commercial real estate lending and in commercial and industrial lending.
Credit card lending also grew at a modest pace on a year-over-year basis. During the current period, credit card lending was flat because of seasonal factors.
Banking contacts continued to note rising competition for loans and bank deposits and noted concerns that credit standards were slipping. However, they cited no signs of credit quality deterioration.
Federal Reserve Bank of Cleveland
Bankers reported that overall conditions held steady during the last two months. Some contacts reported that demand for commercial and industrial loans softened as businesses shifted to cash earned in the strong economy while another noted increased activity in commercial real estate and in mergers and acquisitions. Mortgage demand and core deposits were a bit stronger than the previous survey period, but contacts noted that this strengthening may be a seasonal trend. Delinquency rates remained low; one contact reported that the delinquency rate was at a record low, suggesting that financial conditions are strong.
Federal Reserve Bank of Richmond
Banking and Finance
Overall, loan demand rose moderately in recent weeks.Residential mortgage demand was generally described as stable to increasing modestly. On the commercial side, real estate loan demand strengthened moderately. Business loan demand increased slightly, on balance, while automotive lending was reportedly flat. Bankers in Virginia and the District of Columbia reported increased C&I lending in recent weeks. A West Virginia banker saw higher than normal deposit growth and an uptick in loan demand in oil and gas areas of the state and a leveling off in demand elsewhere. Deposits grew moderately since our last report and contacts continued to report increased rate competition among banks. Credit quality remained stable at high levels.
Federal Reserve Bank of Atlanta
Banking and Finance
Conditions at financial institutions remained healthy. Earnings continued to grow as higher interest rates drove improvement in net interest margins. Credit quality metrics remained positive with charge-offs and nonaccruals still at historic lows. However, financial institutions were reportedly starting to loosen underwriting standards due to slowing demand for credit and increased competition. Contacts indicated that financial institutions were relying more on borrowings and noncore deposits to fund asset growth. In addition, competition for core deposits was fueling an increase in mergers and acquisitions.
Federal Reserve Bank of Chicago
Banking and Finance
Financial conditions were little changed over the reporting period, which was prior to the recent increase in volatility in the stock market. Financial market participants reported steady securities prices and volatility. Business loan demand was flat overall, though contacts reported higher demand from the manufacturing, healthcare, and warehousing sectors. Competition was particularly strong for small business loans. Loan quality and lending standards were little changed. Consumer loan demand was flat overall, though contacts reported a slight increase in demand for mortgage loans. Loan quality and lending standards edged up.
Federal Reserve Bank of St. Louis
Banking and Finance
Banking conditions in the District have improved moderately since the previous report. According to a survey of small and mid-sized banks, outstanding loan volumes grew by 6% in the third quarter relative to a year ago, which is a slight decrease from the growth rate reported in the prior quarter. District loan growth has now slowed in seven straight quarters but remains above the national rate. Commercial and industrial lending continued to be robust, growing by 11% from one year ago. In contrast, residential real estate lending remained slow and lagged behind that of the nation for the third consecutive quarter. Bankers continued to report slow growth in deposits growth.
Federal Reserve Bank of Kansas City
Bankers reported a modest increase in overall loan demand in September and early October. Respondents reported a modest increase for commercial and industrial loans and a slight increase for commercial real estate and agricultural loans. Bankers indicated a slight decrease for consumer installment loans, while the volume of residential real estate loans remained steady. Loan quality improved modestly compared to a year ago, and respondents expected loan quality to improve slightly over the next six months. Credit standards remained largely unchanged in all major loan categories. Overall, bankers reported a slight increase in deposit levels.
Federal Reserve Bank of Dallas
Loan demand growth remained strong over the reporting period, while growth in actual loan volumes eased slightly. The deceleration was most pronounced for residential real estate and commercial/industrial loan volumes, while consumer loan volumes actually grew at a faster pace over the past six weeks. Loan pricing continued to rise as did banks’ cost of funds. Deposit volumes expanded, albeit at a slower pace, with many contacts reporting an increase in competition for deposits. Contacts continued to be optimistic about future economic activity and loan demand, however uncertainty in tariff and trade negotiations and a flattening yield curve were cited as top concerns.
Federal Reserve Bank of San Francisco
Lending activity picked up moderately over the reporting period. Loan demand increased overall. Profitability and net interest margins improved noticeably as increases to lending rates outpaced those for deposit rates. Credit quality continued to be strong. Contacts at credit unions reported an increase in membership.