Moody’s Analytics estimates that commercial and industrial lending in the fourth quarter has grown 0.2% from the third quarter, to $1.22 trillion, the first quarterly increase in two years. Moody’s predicts such lending will rise 3% next year.
Coming off the dramatic lending drop after the crisis struck, these increases are modest. The amount of business loans outstanding remains well below historical levels. In addition, new activity varies significantly from bank to bank and industry to industry. Still, the uptick is notable, say banking analysts. Whereas the crisis forced banks to tighten lending standards and focus on restructuring problem loans, “as banks get healthier, they get more rational and reasonable about normal risk taking,” said the CEO of J.P. Morgan Chase’s commercial bank, Todd Maclin.
Banks, many of which received government rescue funds, have been under pressure to increase lending, though they have faced counter pressures from regulators pushing them to hold more capital.
Many companies that survived the downturn are better positioned to borrow after having cut costs and inventories and paid down debt. Companies until recently have been reluctant to tap credit lines. Overall, they tapped 35.05% of available credit lines as of Sept. 30, according to the Federal Deposit Insurance Corp., well below a recent peak of 42.52% two years ago.
Excerpts from WSJ.com on DECEMBER 29, 2010 in article titled “Banks Open Loan Spigot by Ruth Simon