Lower share of banks willing to lend curbs retail sales

The share of banks more willing to lend to consumers has been declining, a trend that threatens retail-sales growth. More

To continue reading this article, please do one of the following.


Lower share of banks willing to lend curbs retail sales

FEWER FINANCIAL INSTITUTIONS report a willingness to lend to consumers or offer credit cards, signaling a potential threat to consumer spending and retail-sales growth.
Posted 10/4/13

NEW YORK - The share of banks more willing to lend to consumers has been declining, a trend that threatens retail-sales growth.

The net percentage of financial institutions reporting increased willingness to make installment loans, which include credit cards, has averaged 15.4 percent in three surveys of senior loan officers released this year by the Federal Reserve. That compares with 18.9 percent during the same period last year and almost 25.4 percent in 2011.

This gauge of lending practices fell to 13 percent for responses collected between July 2 and July 16, the most recent available, from 22.2 percent in April. The net figure represents the percentage of banks more willing to lend minus the share less willing to lend.

These results have been “oscillating in a narrow band, suggesting choppy sales” will continue into 2014 and probably will be “a bit lower,” said Dan Binder, an analyst at Jefferies & Co. in New York. That’s because the loan-officer survey is a leading indicator of retail-sales growth by about nine months, he said.

“There’s a trickle-down effect from tighter bank credit,” which implies a “muddle through” scenario is likely in months to come, Binder said. Meanwhile, the higher payroll tax for consumers this year also has constrained spending, he added.

Slow growth

Retail sales, excluding autos, have risen an average of 3.6 percent a month this year from a year ago, compared with 5 percent in the same period for 2012 and 7 percent for 2011, based on figures from the Census Bureau. August’s sales growth -- at 3.3 percent -- was the slowest since April. September figures are scheduled to be released Oct. 11, followed by the Fed’s loan-officer survey early next month.

The decline in the net measure of banks’ willingness to lend suggests retail sales could suffer, said Lance Roberts, who oversees $500 million as CEO of Streettalk Advisors LLC in Houston. That’s a concern because household spending accounts for almost 70 percent of U.S. growth, he said.

“Standards still are very tight” -- a lingering effect of the financial crisis -- and “banks still don’t have a lot of gumption to make loans,” Roberts said.

Next Page
PBN Hosted

Join PBN for the best networking event and party of the winter - January 15, 2015 - the Book of Lists Party at the Providence Public Library. Reserve your spot by December 31st and get a holiday gift from PBN!
  • Best Places to Work
    Enrollment is now open for the 7th annual Best Places to Work program. Winners w ...
  • Manufacturing Awards
    Applications are now being accepted for the 2nd Annual Manufacturing Awards. Dea ...
Purchase Data
Book of Lists
Book of Lists cover
PBN's annual Book of Lists has been an essential resource for the local business community for almost 30 years. The Book of Lists features a wealth of company rankings from a variety of fields and industries, including banking, health care, real estate, law, hospitality, education, not-for-profits, technology and many more.
Data icons
Data can be purchased as single lists, in either Excel or PDF format; the entire database of the published book, in Excel format; or a printed copy of the Book of Lists.
  • Purchase an e-File of a single list
  • Purchase an e-File of the entire Book of Lists database
  • Purchase a printed copy of the Book of Lists
    Latest News