Bank lending slows down in U.S.: report

An analysis by the Journal showed the total loans held by 15 large U.S. banks shrank by 2.8 percent in the second quarter, and that more than half of the loan volume in April and May came from refinancing mortgages and renewing credit to businesses and not fresh loans.

The banks surveyed include financial giants such as J.P. Morgan Chase, Bank of America and Citigroup as well as regional banks such as Fifth Third Bancorp, based in Cincinnati, and Regions Financial Corp. of Birmingham, Alabama.

The 15 banks hold 47 percent of federally insured deposits and got US$182.5 billion in taxpayer-funded capital infusions through the Troubled Asset Relief Program, the report said.

As of June 30, the banks had US$4.2 trillion of loans on their balance sheets, down from US$4.3 trillion on March 31.

Loan portfolios shrank at 13 of the big banks, with the steepest decline at Comerica Inc., Dallas, where the loan total was down 4.3 percent to US$46.6 billion in the latest quarter, the paper noted.

Bank of America reported its loan portfolio slipped 3.6 percent to US$942.2 billion in the second quarter, the report said.

A spokesman for the largest U.S. bank by assets said the decrease reflected higher loan losses and lower loan demand as borrowers pay off outstanding debts.

“There were fewer opportunities to make high-quality loans because of the recession,” he said.

The 15 banks reported about US$803 billion in loan volume in the second quarter, up 12.7 percent from the first quarter, The Journal said.

But nearly 60 percent of the increase in April and May came from refinancing mortgages and renewing business loans, according to the report. In contrast, new home purchases accounted for just 23 percent of all mortgage loans.

On a year-to-year basis, total loans held by the 15 big banks rose 17 percent from US$3.6 trillion in the second quarter of last year, the paper reported.

But the increase was skewed by the impact of acquisitions that included J.P. Morgan's takeover of the banking operations of Washington Mutual and Wachovia's purchase by Wells Fargo Bank, it said.

Excluding purchases, loan portfolios shrank by about 10 percent as of June 30 from a year earlier, according to the report.

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