Leading US banks are slowing lending as bankers and borrowers refrain from taking risks in the uncertain economy, The Wall Street Journal reported late Sunday.
A cable car passes a Citibank branch office in San Francisco, California. Leading US banks are not lending as much as bankers and borrowers refrain from taking risks in the uncertain economy,
An analysis by the Journal showed the total loans held by 15 large US banks shrank by 2.8 percent in the second quarter, and that more than half of the loan volume in April and May came from refinancing mortgages and renewing credit to businesses and not fresh loans.
The banks surveyed include financial giants such as J.P. Morgan Chase, Bank of America and Citigroup as well as regional banks such as Fifth Third Bancorp, based in Cincinnati, and Regions Financial Corp. of Birmingham, Alabama.
The 15 banks hold 47 percent of federally insured deposits and got 182.5 billion dollars in taxpayer-funded capital infusions through the Troubled Asset Relief Program, the report said.
As of June 30, the banks had 4.2 trillion dollars of loans on their balance sheets, down from 4.3 trillion dollars on March 31.
Loan portfolios shrank at 13 of the big banks, with the steepest decline at Comerica Inc., Dallas, where the loan total was down 4.3 percent to 46.6 billion dollars in the latest quarter, the paper noted.
Bank of America reported its loan portfolio slipped 3.6 percent to 942.2 billion dollars in the second quarter, the report said.
A spokesman for the largest US bank by assets said the decrease reflected higher loan losses and lower loan demand as borrowers pay off outstanding debts.
"There were fewer opportunities to make high-quality loans because of the recession," he said.
The 15 banks reported about 803 billion dollars in loan volume in the second quarter, up 12.7 percent from the first quarter, The Journal said.
But nearly 60 percent of the increase in April and May came from refinancing mortgages and renewing business loans, according to the report. In contrast, new home purchases accounted for just 23 percent of all mortgage loans.
On a year-to-year basis, total loans held by the 15 big banks rose 17 percent from 3.6 trillion dollars in the second quarter of last year, the paper reported.
But the increase was skewed by the impact of acquisitions that included J.P. Morgan's takeover of the banking operations of Washington Mutual and Wachovia's purchase by Wells Fargo Bank, it said.
Excluding purchases, loan portfolios shrank by about 10 percent as of June 30 from a year earlier, according to the report.