C&I Lending Standards Tighten, Mortgage Standards Ease

Over the past three months, banks reported tightening lending standards for C&I and CRE loans on net according to the April 2016 Senior Loan Officer Opinion Survey on Bank Lending Practices. The survey results indicate that demand for C&I loans weakened during the first quarter of 2016, while CRE loan demand strengthened. Banks also reported easing lending standards for most residential mortgage loans, as mortgage demand strengthened.

Although the majority of banks did not change their lending standards, a net 11.6% of banks reported tightening standards for C&I lending to large and middle market firms, while a net 5.8% of respondents reported tightening standards for small business lending. Most respondents who tightened standards reported a less favorable or more uncertain economic outlook, as well as worsening of industry-specific problems affecting borrowers.

The April survey included a special question on lending to firms in the energy sector. Most domestic banks indicated that such lending accounts for less than 5% of outstanding C&I loans, while foreign banks indicated that those loans amounted to greater than 5% of outstanding C&I loans. Respondents also noted some spillover from the weakening energy sector onto households and businesses in energy-sector-dependent regions. A significant net fraction of banks noted that credit quality deteriorated for auto and non-energy-sector C&I loans in those regions. In addition, moderate net fractions noted deterioration in CRE, credit card loans, and loans other than credit card and auto loans over the past year.

Read the survey release.