US: Bank loan demand declines again
2024-11-19
■ The trend of tightening loan standards caused by financial tightening has largely ended
■ Credit card loan standards are stricter for customers with lower credit scores, and household credit conditions are polarized
The Federal Reserve (FRB) released its latest Senior Loan Officer Opinion Survey (SLOOS) on the 12th. The FRB conducts this survey every quarter to US financial institutions and includes changes in loan standards and funding needs compared with three months ago. The surveyed financial institutions received the questionnaire on September 30 and completed the response by October 10.
The Commercial and Industrial Loan Demand Index (DI, proportion of demand increase minus proportion of demand decrease) for large and medium-sized enterprises (annual sales of more than US$50 million) was -21.3, a significant drop from 0 in the July survey, indicating that loan demand has decreased again. Judging from the answers of individual banks, the proportion of answers that "demand has not changed" has reduced in the past three months, while the answers that "demand has decreased" have increased significantly. The reasons for the decline in loan demand include customers cutting back on equipment investment and decreased funding needs related to corporate mergers and acquisitions (M&A). In addition, the loan standard index (DI, the proportion of tightening standards minus the proportion of relaxing standards) was 0, which continued to decline from 7.9 in the previous survey and reached the lowest level since the April 2022 survey (-1.5). This data is also at its lowest point since the interest rate hike began in March 2022. It indicates that the positive range in the tightening area may end, and the tightening trend of loan standards caused by financial tightening has ended. Among the answers about loan standards, more than 80% said "no change," and the proportion of tightening and relaxing was equal.
Regarding the household loan demand index, the housing loan interest rate fell during the survey period, and high-end loans (large housing loans for the wealthy, -14.3→-4.3) showed an improving trend but have not yet escaped the negative range. Auto loans (-10.4→-12.8) and credit cards (2.0→-2.1) have deteriorated again. In terms of the loan standard index, auto loans (0→4.1) and high-end loans (0→4.3) have become stricter again, while credit cards (20.0→18.4) have shown an easing trend. The new default rates from July to September show that auto loans (7.95→8.12%) and residential loans (3.35→3.60%) have increased month-on-month, while credit cards (9.05→8.79%) have decreased, which reflects the above changes.
This survey also added questions about the impact of credit scores on credit card loan standards. Banks said that compared with the beginning of the year, the probability of approving credit card loans is higher for borrowers with high credit scores. In comparison, the likelihood of approval for borrowers with low credit scores is lower. This again shows the polarization trend of household credit status, and we need to be vigilant about whether personal consumption will become unstable.
■ Credit card loan standards are stricter for customers with lower credit scores, and household credit conditions are polarized
The Federal Reserve (FRB) released its latest Senior Loan Officer Opinion Survey (SLOOS) on the 12th. The FRB conducts this survey every quarter to US financial institutions and includes changes in loan standards and funding needs compared with three months ago. The surveyed financial institutions received the questionnaire on September 30 and completed the response by October 10.
The Commercial and Industrial Loan Demand Index (DI, proportion of demand increase minus proportion of demand decrease) for large and medium-sized enterprises (annual sales of more than US$50 million) was -21.3, a significant drop from 0 in the July survey, indicating that loan demand has decreased again. Judging from the answers of individual banks, the proportion of answers that "demand has not changed" has reduced in the past three months, while the answers that "demand has decreased" have increased significantly. The reasons for the decline in loan demand include customers cutting back on equipment investment and decreased funding needs related to corporate mergers and acquisitions (M&A). In addition, the loan standard index (DI, the proportion of tightening standards minus the proportion of relaxing standards) was 0, which continued to decline from 7.9 in the previous survey and reached the lowest level since the April 2022 survey (-1.5). This data is also at its lowest point since the interest rate hike began in March 2022. It indicates that the positive range in the tightening area may end, and the tightening trend of loan standards caused by financial tightening has ended. Among the answers about loan standards, more than 80% said "no change," and the proportion of tightening and relaxing was equal.
Regarding the household loan demand index, the housing loan interest rate fell during the survey period, and high-end loans (large housing loans for the wealthy, -14.3→-4.3) showed an improving trend but have not yet escaped the negative range. Auto loans (-10.4→-12.8) and credit cards (2.0→-2.1) have deteriorated again. In terms of the loan standard index, auto loans (0→4.1) and high-end loans (0→4.3) have become stricter again, while credit cards (20.0→18.4) have shown an easing trend. The new default rates from July to September show that auto loans (7.95→8.12%) and residential loans (3.35→3.60%) have increased month-on-month, while credit cards (9.05→8.79%) have decreased, which reflects the above changes.
This survey also added questions about the impact of credit scores on credit card loan standards. Banks said that compared with the beginning of the year, the probability of approving credit card loans is higher for borrowers with high credit scores. In comparison, the likelihood of approval for borrowers with low credit scores is lower. This again shows the polarization trend of household credit status, and we need to be vigilant about whether personal consumption will become unstable.