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Large Banks Seeing Faster Moderation In Loan Books [1/2]

US
  • Checking in with the Fed’s weekly banking H.8 data, most recently for May 10, total loans and leases in bank credit declined for the latest two weeks with -$3B after -$17B as it reverses a reasonable +$42B lift from the final week of April.
  • It remains far more measured than the $45-60B weekly declines in the second half of March, but still maintains a clearly softer trend than credit extension prior to emergence of regional banking issues.
  • How much this softer banking credit growth weighs on the economy remains an area of contention. It was again shown today by SF Fed’s Daly (’24 voter) saying her prior from speaking to contacts is that the credit tightening is worth as much as a couple hikes in the Fed Funds rate although has seen other estimates ranging from nothing at all to as much as 200bps.
  • By sector, the latest small decline in the stock of credit has been concentrated in commercial & industrial loans (perhaps unsurprising after the recent issues for the sector in the Fed’s SLOOS) plus some for ‘other’ loans.


  • The breakdown by bank is interesting though, with small banks continuing to extend more credit than their larger counterparts. Even on a four-week average basis, small banks have been increasing loan books by an average $8B per week compared to $0B for large banks.


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