Banking: The Big Picture

Mike Vogel | 10/1/2010

• Consumers don't want debt either Credit card use is in decline, the Fed reports. The July survey found demand for consumer debt at best unchanged. "They're de-leveraging, just like business is." — JPMorgan Chase's Mark Bensabat [Photo: Brook Pifer]

The patient has a pulse but
is a long way from healthy.
"It's certainly starting to feel like in parts of Florida things are starting to get better," says Wells Fargo's Shelley Freeman, but "in parts of Florida, things are still very challenging." The Fed beige book reports economic activity in the southern U.S. slowed in early summer. Retailers were less optimistic. Tourism operators worried about the impact of the oil spill. Employers preferred stretching existing staff and bringing in temps rather than making permanent hires.

Credit is available, but ...
The Fed's July survey of senior loan officers found lending conditions easing but mostly at large banks. Smaller banks were more wary. Eased standards and terms came particularly in categories seeing competition from other banks and non-bank lenders.

The survey found the first easing for small firms since 2006. Easing is relative. At eight of 10 banks, conditions were unchanged.

But creditworthy borrowers don't want more debt. The caveat here is the definition of creditworthy, as many formerly creditworthy companies no longer are deemed so. That said, most banks saw no increase in business loan demand, the July survey showed. "Business loan demand was also muted" in the southern United States, according to the beige book report for the Atlanta region.

Bank of America's Michael Fields cites a National Federation of Independent Business' August survey showing 91% of companies say their financing needs are being met or they don't want to borrow. The percentage of companies planning capital expenditures is near a 35-year low. "What businesses need are customers, giving them a reason to hire and make capital expenditures and borrow to support those activities," the NFIB says.

• Sum-up "My sense is we're starting to come back. We're not coming back fast, but we are coming back. I wouldn't try to tell you things are great because they're not. But they are getting better." — SunTrust's Tom Kuntz [Photo: Mark Wemple]

Comeback signs
Regions Bank's Brett Couch has seen a slight increase in loan demand from businesses. But it's what he calls opportunistic borrowing — companies buying facilities or other companies they see as a good value with prices down — rather than borrowing to accommodate expected growth.

Meanwhile, Bank of America's Fields says line of credit use, a key measure of businesses' appetite for debt relative to their business growth, is stabilizing after having dropped.

Financial employment
Several big banks say they are hiring. But, in general, banks and other depository institutions saw employment drop 4.9% (4,700 jobs) as of July, compared to a year earlier, says Florida's labor stat keeper, the Agency for Workforce Innovation. Overall, employment in the lending business in Florida was down 4.4% in July (6,800 jobs), compared to July 2009.

Dwindling numbers
Florida's dwindling number of banks cumulatively lost $395 million in earnings in the second quarter ended June 30, an improvement from the $1-billion loss in the same period last year. The percentage of money-losing institutions declined to 62% from 71%. The amount of foreclosed real estate that banks held increased to $1.95 billion, up from $1.6 billion. The number of FDIC-insured institutions fell to 265 from 301.

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