Tuesday, November 17, 2009

Commercial Lending by US, Canadian, and Euro Area Banks Continue Steady Decliine

Data from the Federal Reserve’s weekly sampling of 875 commercial banks for C&I and CRE outstanding balances shows continued steady decline in overall outstanding commercial loan balances. As shown in Slide 1, C&I and CRE balances have steadily declined every month in 2009, with an overall decline of 9.1% as of 11/04/09. Surprisingly, CRE loans have only declined about 5%, while C&I loans have declined almost 14%. (Double click on image to enlarge.)

Tightening credit conditions and the uncertain economic outlook in the United States continues to drive a decline in Canadian business lending. Looking at month-over-month data in Slide 2, business loans outstanding have declined 16.3%. Similar to the US, the decline in business mortgages is half that of the decline in non-mortgage loans (-7% vs. -17%).

The Euro Area’s slight decline in commercial loans outstanding continues. Overall loan demand is down due to a reduction in inventory investment and merger & acquisition activity. However, the month-over-month data in Slide 3 highlights a shift from shorter term loan maturities into longer term loans as a result of enterprises locking in long term funding at lower interest rates.

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