Take a look at how bad it is for banks right now…
How Bad Is It For Banks Right Now…
August 21 (King World News) – Peter Boockvar: In light of the commercial bank challenges with an inverted curve and bad marks on longer term US Treasuries at the same time the deposit battle is getting intense and margins are getting negatively impacted as a result, the now important Dallas Fed’s Banking Conditions Survey just came out covering data collected between August 8-16 and 71 banks responded to the survey.
Here is what the Dallas Fed said:
“Loan demand declined for the eighth period in a row—now a full year—though the rate of decline eased somewhat. The decline in overall loan volume also decelerated, but residential real estate loan volume posted a sharp decline after stabilizing in May and June. Loan nonperformance continued to increase, with an acceleration seen in consumer loans.
Loan pricing pushed up further. Credit standards continued to tighten, though the share of bankers reporting a tightening fell to its lowest level since February. Bankers’ outlooks remained pessimistic, with most expecting a decrease in loan demand and a deterioration of general business activity over the next six months.”
Specifically:
C&I loans saw a less negative figure for loan volume and tick down in non-performing loans. Credit standards were less negative.
CRE loan volume were also less negative and dip in non-performing loans after the previous survey spike. Credit standards were also less negative.
Residential real is where things went south with loan volume going from zero in June to -17.7 in August. There was though a drop in the non-performing loan indicator and little change in credit standards.
Also of note, with consumer loans, volumes were less negative but the non-performing category jumped to 14.5 from 6.9. Credit standards were less negative…
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The overall Banking Outlook saw loan demand go to -39.4 from -50.8 and the non-performing index dipping to 46.5 from 50.9 with 49.3% seeing an increase vs 2.8% seeing a decrease.
The General Business Activity outlook over the past 6 weeks improved to -19.7 from -42.9 and the six month outlook was at -45 vs -51.6.
So bottom line, less bad mostly with a sharp drop in new loans in residential (existing home sales are punk as we know why) and a jump in non-performing consumer loans.
Finally, here are some comments and I specifically bolded the lag part of higher for longer impact that I keep harping on.
“Utilization continues to decline, and high interest rates are starting to show up in financial statements of borrowers.”
“The macro impact of the rise in interest rates will continue to restrict economic growth.”
“Commercial real estate lending markets are shutting down. We are hearing from customers that many banks are telling them they are “pencils down.” There are a lot of projects under construction that need to work through the pipeline, particularly in the multifamily category.”…
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“[An issue of concern is] borrowers’ cash flow stress from repricing real estate balloon loans at significantly higher rates.”
“Competition for deposits is fierce. Customer relationships are being tested by high rates offered from out-of-market institutions. We continue to see consumers steadily spend down their deposit account balances for various reasons.”
“Non-maturity deposit runoff is persisting longer than expected. Competition for deposits is very strong.”
“Commercial clients are pulling back due to increased uncertainty and focus on cost structures/efficiency. Interest expense is reducing free cash flow available for investment.”
“Continued increases in regulatory uncertainty and the economic outlook have created a difficult environment in which to forecast. We are seeing some areas of credit stress, particularly in the unsecured consumer space.”
“[Issues of concern are] policy decisions coming out of Washington, high interest rates, borrowers becoming overextended, concerns with commercial real estate throughout the country, 2024 election politics to become nastier, U.S./China relations and the Russia–Ukraine war.”
“We are concerned about an increase in regulatory burden.”
“Leading economic indicators are materially worsening alongside meaningfully restrictive monetary policy, which will likely lead to an overcorrection to the downside across markets and the economy.”
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