"We continue to see a strong, steady improvement for America’s banking industry, headlined by a sharp increase in business loans and a dramatic improvement in the quality of bank portfolios. Banks are well positioned to continue their role as critical economic drivers, supporting job growth and business expansion. Banks have ample capacity and are ready and willing to meet increased loan demand as business and consumer confidence improves.”
Bank Lending Hits $8 Trillion for First Time
“Banks reached a historic milestone in the second quarter, holding more than $8 trillion in loans on their books for the first time ever. The double-digit increase in business lending reflects increasing confidence, with businesses more likely to consider expansion in an improving economy. We’re seeing the natural link between businesses being willing to borrow and a growth in job creation, with around 210,000 new jobs created each month. There has never been a better time for businesses that want to borrow and expand their operations. Rates are low, and a highly competitive marketplace ensures banks will offer a broad menu of options when it comes to structuring loans.
“While total lending is up $377 billion year-over-year, residential mortgage lending remains weak. New regulatory requirements on mortgage lending are not helping, and will continue to dampen a key economic driver. First-time homebuyers are feeling the pinch most intensely."
Earnings Up, But Compliance Costs Dampen Profitability
“While net income is at a near-record high, profitability is down compared to pre-crisis levels as institutions grapple with a surge in compliance and regulatory costs that have had a sharp impact on the bottom line. Cutting expenses has supported bank earnings. While institutions continue to monitor every dime to ensure costs remain firmly under control, there is a limit on how far that can go. Business confidence and willingness to expand will be critical going forward, and will have a direct impact on both future earnings and the direction of the broader economy.”
Asset Quality Continues to Improve
“Total past-due and non-performing loans continue their downward march. We are not yet back to normal levels, but the strong loans being put on the books today and the reduction in problem loans paints a very good picture of bank asset quality. The level of non-performing loans is down almost 56 percent since its peak in the first quarter of 2010. Net charge-offs fell to the lowest level since the third quarter of 2007.”
High-Quality Capital Continues to Grow
“Capital in the industry is at record levels, and banks have been steadily building high-quality – or tangible equity – capital quarter after quarter. Banks continue to build strong reserves of high-quality capital, which now stands 42 percent higher than 2008 levels. Regulators have categorized 99.8 percent of banks as well-capitalized, which means their capital levels are at least 25 percent higher than minimum standards.
“Total industry capital is now almost $1.7 trillion, ensuring our industry is well equipped to withstand even the most challenging economic circumstances. Adding reserves banks have set aside for possible loan losses, there is a total buffer protecting the industry of over $1.8 trillion.”
The American Bankers Association is the voice of the nation’s $14 trillion banking industry, which is composed of small, regional and large banks that together employ more than 2 million people, safeguard $11 trillion in deposits and extend nearly $8 trillion in loans.
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