Banks reported uneven demand for loans from businesses and households in the third quarter, a Federal Reserve survey found, and most said they maintained the same underwriting standards and terms as they had in the spring.
Demand for commercial and industrial loans to businesses remained “about unchanged,” while a “moderate fraction” of the banks who responded said they experienced an uptick in demand for commercial real-estate loans, according to the Fed’s survey of senior loan officers released Monday.
More than a third of banks reported “moderately stronger” demand for construction and land development loans in the third quarter, and 20% reported “moderately stronger” demand for loans for nonfarm, nonresidential properties and for multifamily residential properties.
Overall, banks reported little change in their lending standards and terms for commercial and industrial loans, and the ones that did change were more likely to have tightened, especially for large- and middle-market borrowers, the Fed said. Firms that tightened cited a less-favorable or more-uncertain economic outlook, as well as worsening problems in particular industries, though some also pointed to reduced tolerance for risk and decreased liquidity in the secondary market for such loans.
Banks reported easing some business loan terms, including spreads on maturities and credit lines for firms of all sizes. But they also increased premiums charged on riskier loans for large and middle-market firms.
On the consumer side, banks reported demand for most categories of mortgages had weakened since the second quarter, but demand for credit cards had increased.
Banks reported easing lending standards on loans eligible for purchase by the government-sponsored enterprises—including Fannie Mae and Freddie Mac—and for mortgages that conform to qualified mortgage rules put forth by the Consumer Financial Protection Bureau.
And “modest fractions” of banks reported easing lending standards for credit cards and auto loans. Still, the vast majority of banks reported they still didn’t originate loans to subprime borrowers.
The survey of 69 domestic banks and 23 U.S. branches of foreign lenders was conducted between Sept. 29 and Oct. 13. “Net fractions” of banks refer to the fraction of domestic respondents that reported a given trend, such as strengthening demand for loans, minus the fraction of domestic respondents that reported the opposite trend, in this case, weakening demand for loans. Unless otherwise indicated, the survey refers to reports from domestic banks.