- In a much more conservative lending environment following the depths of the Great Recession, commercial and industrial lending and commercial real estate lending are the bright spots driving overall loan growth.
Commercial Bank Lending Starting to Ramp Up
Despite a rough first quarter for GDP growth, lending at commercial banks is beginning to point to a pickup in economic growth. Total loan growth grew 5.0 percent year over year in June, approaching post-recession highs of 5.4 percent, which occurred in May 2012. Commercial and industrial (C&I) lending at commercial banks was up 10.4 percent in June as businesses still feel relatively positive on the U.S. economy despite the rough start to 2014 (top chart). Also driving growth in overall loans and leases in bank credit are commercial real estate loans. After reaching its trough in November 2010, commercial real estate lending has been on a steep upward trend and is up 7.1 percent year over year in June. This comes as residential real estate lending has hardly been able to return to growth following the Great Recession amid much tighter lending standards. While lending standards remain tight, they are beginning to gradually loosen making credit available to a slowly growing number of borrowers. However, the housing market has experienced a rough 2014 thus far, as shown by recent housing starts and building permits data, so residential real estate lending likely still faces challenges ahead with an environment of still- rising prices and volatile sales and starts activity.
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