Price changes impact demand for commercial and industrial loans, bank survey shows

Over the past three months, loan demand fell for commercial and industrial companies with annual revenue of at least $50 million, according to a national bank survey.

The Federal Reserve System Board of Governors on Monday (Nov. 7) released a survey on changes in bank loan standards and demand in the third quarter. Senior loan officers from 69 U.S. banks and 21 U.S. branches and agencies of foreign banks participated in the survey.

When asked what led commercial and industrial companies to change from whom they borrowed, banks reported “price and nonprice terms associated with other sources of funding contributed to the shifts,” according to the survey.

While loan demand fell for commercial and industrial companies with annual revenue of at least $50 million, it remained the same for the loans for companies with sales of less than $50 million.

Loan standards didn’t change for commercial and industrial loans, but they tightened on loans for commercial real estate.

Banks saw stronger demand for construction and land development loans while loan demand was unchanged for multifamily residential and “nonfarm nonresidential properties,” the survey showed.

When asked about the outlook for commercial and industrial loan demand over the next six months, banks expect loan demand from companies of all sizes to remain unchanged.

Regarding household loans, banks saw demand rise while standards eased on several types of these loans.

With consumer loans, standards remained unchanged while demand rose for auto and credit card loans.

Most banks reported they would be less likely to approve credit card applications for borrowers with FICO scores of 620. But banks were more likely to approve credit card applications for borrowers with FICO scores of 720.