The economy is apparently humming along and interest rates – while rising – remain low, so what gives? According to FDIC numbers, 12-month loan growth rate fell for the 6th straight quarter in Q3 to its weakest since the end of 2013.
Digging deeper, the growth rate of business lending fell to its slowest since the start of 2011.
Combine slowing loan growth and a flattening yield curve, and one wonders about the prospects for bank earnings next year. “The plane used to be flying at 30,000 feet, now it’s at 10,000,” says FIG Partners’ Chris Marinac. “There are many banks that are concerned about how much they can grow the loan book in 2018.”
Checking individual players in Q3, JPMorgan (NYSE:JPM) and BofA (NYSE:BAC) saw loan growth of 3% Y/Y, while Citigroup (NYSE:C) had 2%, and Wells Fargo (NYSE:WFC) posted a 1% decline. Smaller banks hardly fared better. Loans were about flat at BB&T (NYSE:BBT), with CEO Kelly King saying clients seemed more interested in raising money in the bond market to pay down bank loans.
Article: Christina Rexrode at the WSJ