C&I Loan Standards Ease as Demand Weakens

More bankers began easing credit standards and terms amid weakening demand for a wide swath of commercial and real estate loan products in the third quarter, according to the Federal Reserve’s latest senior loan officer opinion survey released today. Credit standards for consumer loans continued to tighten amid steady demand.

A net 8.5 percent of banks reported easing credit standards for commercial and industrial loans to large and middle-market firms, while 8.8 percent said they eased for small firms. A net 27.2 percent of banks reported narrower spreads for large and midsize firms, while 19.4 percent said the same for C&I loans to small companies. On net, 11.3 percent of banks reported weaker loan demand from large businesses; only 2.9 percent of banks on net saw loan demand weaken for smaller firms.

Loan standards generally remained unchanged on net for commercial real estate except for multifamily loans, which saw 22.2 percent of banks tighten. Banks reported weaker demand across a range of CRE loan types. Net percentages of banks reported easing standards on most residential mortgage loan types as demand weakened.

Meanwhile, a net 9 percent said they tightened standards on credit cards, and 9.8 percent said they tightened standards on auto loans, principally through wider spreads and fewer exceptions. The main reasons cited for tightening on consumer loans were potential deterioration in the portfolio, lower risk tolerance, the economic outlook and, in the case of auto loans, uncertain or less favorable expectation for collateral values.