The Fed's quarterly Senior Loan Officer Survey ("SLOOS") for October was mixed, but continued to point to a much more constructive environment for bank lending than seen at the peak of the monetary tightening cycle in 2023.While there is no sign of a nascent lending boom, conditions have normalized from last year's tightest levels, even if consumer credit demand remains relatively subdued.
- Lending Standards: The survey showed a general continuation of the trend of looser standards for business and consumer loans, with mortgage standards becoming slightly more stringent. Overall, each of these categories enjoyed much looser standards than seen at their tightest point of the post-pandemic cycle in 2023.
- Loan Demand: Demand for loans was much more mixed: demand from businesses retraced vs July, but continued to improve for commercial real estate and for most categories of residential mortgages. Consumer loan demand was relatively flat vs the previous quarter.
- Business Lending: The vast majority of large and mid-market banks said lending conditions to large and middle-market firms haven't changed (83.9% vs 82.5% in the July survey), with a a notable uptick in in those saying "eased somewhat" (8.1% vs 4.8% prior). A net 0.0% of loan officers saw tightened standards for commercial and industrial (C&I) loans, vs 7.9% the prior quarter and 50.8% in Q3 2023. For small businesses there was a bit of a setback, however, to 13.3% from 8.2% prior but again, well below 49.2% in Q3 2023. Notably though "stronger demand" was weaker: -21.3% diffusion for large/medium C&I and -18.6% for small businesses, each reverting from 0.0% in 3Q 2024. This compared with levels in the -50% area in 2023 however. Lending spreads remained relatively unchanged.
- Home Mortgage/Consumer Lending: Lending standards were "basically unchanged" on balance across most categories of residential real estate loans and home equity lines of credit, with somewhat weaker demand for real estate lending. "Demand weakened for auto and other consumer loans and remained basically unchanged for credit card loans." Notably though standards tightened for credit card loans (apparently a bifurcation between more likely approvals for prime borrowers and less likely for near/subprime clients), albeit reflecting a slightly lower net percentage of banks (18.4% vs 20.0% in 3Q 2024 and 36.4% in 3Q 2023).
On the latter topic, in a set of special questions about credit cards, "banks reported that the level of demand for credit card loans was stronger in the third quarter of 2024 than before the pandemic (end of 2019) across most credit score categories and all dimensions of credit card demand (that is, demand for new cards, requests for increased credit limits, and utilization of existing credit). Banks, on net, forecast further strengthening in demand over the next six months, with an expected increase in borrower spending, as the most cited reason for their outlook."
