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Banking Update: Loans & Leases See Broad-Based, Sharp Increase [3/3]

  • Against the backdrop of regional banking deposit flight, it’s surprising that loans and leases in bank credit saw their second largest seasonally adjusted weekly increase since the pandemic at $63B (a similar $54B in non-seasonally adjusted terms) after a trend slowdown in credit growth.
  • The sharp increase could be a sign of companies drawing down credit lines on worries about limited future access if banks pull them and/or fail and is worth watching closely ahead.
  • The increases were led by all sectors (ex-consumer loans) rather than any single specific category. Within real estate, a continued increase in commercial real estate was of note considering the oversized contribution from small banks (shares further below).

  • For context, 2022 saw small domestic banks represent a slight majority of bank credit extension, despite an aggregate loan book only being about two-thirds the size of those of large domestic banks.
  • Using as a crude high frequency indicator of credit conditions, this coming Friday’s update with data for the week ending Mar 22 might give a better idea of any initial tightening as regional banking woes developed.
  • For now at least, there has been little sign of it in latest mortgage rates when focusing on the residential real estate subset with only a limited further rise in spreads in the time since the SVB failure.

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