In 2018, Banks Expect to Ease Standards for C&I Loans, Tighten for CRE

Many banks anticipate that they will ease credit standards and terms for large and middle-market firms in 2018, but they expect to cool things down in the robust commercial real estate market, according to the Federal Reserve’s latest senior loan officer opinion survey released today. Over the year ahead, a net 10 percent of banks said they expected to ease standards for large or midsize companies, and 22.9 percent on net expected to decrease spreads amid growing demand — on net, 27.1 percent of banks anticipated that loan demand would grow. Meanwhile, roughly one in five banks on net said they expected to tighten standards on construction and multifamily loans, while about 10 percent said they were likely to tighten standards on other CRE loans in 2018.

In the previous quarter, a net 10 percent of banks — up from the period before — reported easing credit standards for commercial and industrial loans to large and middle-market firms, although on net zero banks said they eased for smaller firms. A net 18.5 percent reported being willing to approve larger credit lines for large and midsize borrowers, while 16 percent on net reported narrower spreads for these companies.

On net, fewer banks reported easing terms for smaller companies, and by some measures small firms saw loan terms tighten during the reporting period. On net, 2.9 percent of banks reported stronger loan demand from large businesses, reversing a weaker demand trend from the previous quarter, while a net 6 percent saw loan demand improve for smaller firms. This aligned with projections for 2018, which saw just 1 percent of banks expecting to ease standards despite robust growth in demand.

Meanwhile, a net 11.8 percent reported tightening on construction loans and 16 percent said they tightened standards on multifamily loans. Banks reported net weaker demand in both CRE loan types. On residential loans, banks reported easing standards on most residential mortgage loan types. Nearly one in 10 banks said they were more willing to make consumer installment loans. Fewer banks tightened standards on credit cards and auto loans than in the previous quarter. Just 1.9 percent said they tightened on credit cards, and 4.9 percent said they tightened on auto loans.