Treasury Reports Tepid Lending in May

Lending by bailed-out banks remained tepid in May, with total loan balances flat and only a modest uptick in overall originations.

In its monthly survey of lending by the 21 largest financial institutions to receive federal assistance through the $700 billion Troubled Asset Relief Program, the Treasury Department said total originations rose in four categories:  mortgages, credit card loans, commercial real estate renewals and commercial real estate new commitments.  

Total originations fell in home equity lines of credit, other consumer lending products, and commercial and industrial renewals. They were flat among commercial and industrial new commitments.

Total originations for all categories increased 1 percent. Fourteen banks posted increases in originations, and seven banks posted declines.

In a sign that businesses continue to struggle, commercial loan balances decreased in May among 16 of the respondents, with the other five banks saying balances had increased. But there were glimmers of hope for the housing industry as total mortgage originations increased at 15 banks and declined at three, with a median increase of ten percent.

Bankers attributed the rise in mortgage originations to low interest rates in the first part of May. But the Treasury noted “the rise in rates during the end of May contributed to lower pipelines for the coming months.”

Some banks have been much busier than others. Morgan Stanley posted the largest increase in total originations at 160 percent, with both Bank of New York Mellon Corp. and American Express Co. posting increases greater than 50 percent.  State Street Corp. and KeyCorp had the biggest reversals of the bunch, with loan originations down 24 and 23 percent, respectively.

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