Why the lending climate has bankers singing an '80s Clash hit
By Margie Manning
Tampa Bay Business Journal
Published: Sep 10, 2014

Bankers are getting little pickier about the loans they make to business customers.

That's one observation in a report from Sterne Agee & Leach, looking at trends in bank lending as third quarter 2014 draws to a close.

"We were reminded of The Clash's 1982 hit ‘Should I Stay or Should I Go,'” 10 Sterne Agee banking analysts wrote about their check-ins with bank management teams over the past couple of weeks.

While loan growth in the second quarter was the largest since 2007, at 7.1 percent industrywide, it appears to be slowing in the current quarter, and is trending at 6.2 percent, the report said, citing Federal Reserve data.

The general demand for credit is solid, as are loan pipelines. But more bank management teams are walking away from deals, because intense competition for loans means the terms or pricing make it tough to generate an acceptable rate of return, the report said.

If banks say no to a deal, loan growth may slow and investors could be disappointed, or as the song goes, "If I go there will be trouble,” analysts wrote.

If a bank is aggressive and books the loans, the interest rate might not be high enough to provide good income, or there could be problems with the credit quality, prompting the next line in the song, "If I stay it will be double.”

For business lending, the biggest impact is seen in commercial and industrial loans, which are the general purpose loans companies take out to provide working capital or to finance major capital expenditures. Overall, C&I lending is slowing from a peak of 14 percent increase (on an annualized basis) last quarter to closer to 6 percent this quarter, the report said. C&I lending appears to be holding a little stronger among banks in the Southeast U.S., however.

Commercial real estate lending is trending slightly stronger, at about a 6.8 percent increase this quarter versus 6.7 percent last quarter.

Consumer loan growth is slightly less at about 5 percent increase this quarter versus 8 percent last quarter, but it's still well above the first quarter of 2014 and any quarter of 2013, the report said.

Third quarter mortgage trends have been tracking relatively in line with the second quarter.

Margie Manning is Quality and Content Editor of the Tampa Bay Business Journal. She also covers banking, finance and professional services.