The Federal Reserve recently released its quarterly Senior Loan Officer Opinion Survey on Bank Lending Practices. Results show that there was some easing on lending standards and terms for C&I loans to large and middle market firms. Regarding all respondents, the percentage where standards remained basically unchanged slipped to 75.9% versus 76.4% in the January survey. The percentage that eased slightly rose to 24.1% from 23.6%. Banks that eased lending standards cited increased competition from other business credit sources along with a more favorable economic outlook.
For C&I loans to large and middle-market firms, there was some deterioration in the moderately to substantially stronger categories. In April, the percentage was 46.3% versus 47.3% in January. Banks reporting demand similar to the last quarter fell to 44% from 51%, and those reporting moderately weaker demand increased to 9% from about 2% previously. Reasons for the reduction were that customer internally generated funds had increased, and plant or equipment investment decreased.
Regarding bank inquiry into C&I loans, banks reporting a similar amount of inquiries stood at 47%, unchanged from the January survey. The percentage of banks reporting increased loan inquiries totaled 47% versus 51% in the previous survey; while 6% of banks reported a moderate decrease in inquiries versus 2% of banks in the January 2005 survey.
In commercial real estate lending, the percentage of banks reporting lending standards remained mostly unchanged at 74% from 73%. Meanwhile, 24% of banks surveyed reported an easing in standards versus about 26% in January. In commercial real estate loans, demand has increased a bit from January. The percentage of banks reporting moderately to substantially stronger demand was 27.8% versus 25.5% in the January survey. Those reporting similar demand or weaker demand fell to 64.8% and 7.4%, respectively, in April versus 65.5% and 9.1% in January.
In the residential loan sector, the percentage of banks reporting similar credit standards totaled 94% in the April survey versus 92% in January. The percentage of banks reporting easing was 4% versus 8% previously, while tightening bank standards increased to 2% versus no banks reporting tighter standards in January. The percentage of banks reporting similar demand for residential loans from the previous quarter stood at 53% versus 65% of banks in January. The percentage of banks reporting a moderate increase was 14% versus 4% previously, and the percentage of banks reporting moderate to substantially weaker demand totaled 33% versus 31%.
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