American Banker Index of Banking Activity Shows Pricing Pressure Offsetting Growth

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Composite Reading of 57.5 down from last month’s record

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Competition for loan demand is getting more and more aggressive with our competitors offering longer terms.

The most recent American Banker Index of Banking Activity (IBA) registered a reading of 57.5, down from the previous month’s record of 60.6, which was the highest level since the index began tracking banker sentiment last June.Data is based on a survey conducted in May.

Respondents cited intense lending competition that put pressure on pricing, both for commercial and consumer loans. In addition, a substantial share of bankers reported that business conditions in the markets where they operate improved in the month. The index component that tracks overall business conditions tallied its highest reading since the index’s launch.

The IBA tracks the level of business activity across a range of factors that are fundamentally important to the commercial banking business. Composite readings above 50 indicate an expansion of activity and readings below 50 point to contraction. The farther from 50 a reading is, the stronger the indicated change.

The IBA is a product of American Banker's regular surveys of banking executives and is published in partnership with VantageScore Solutions. The latest installment of the index was based on 276 responses to surveys.


April’s 35.8 reading for commercial pricing was the lowest since October, while the consumer loan reading of 44.2 was also weak. Indicators that track consumer loan activity continued to indicate growth but were off from levels tallied a month earlier.

Despite the optimism about in-market business conditions, several bankers noted layoffs at major employers, some due to sequestration and some not. Bankers themselves also pared payrolls. The headcount reading for April was 48.5, down from the 51.5 reported a month earlier.


In addition to the quantitative elements of the survey that support the IBA, open-ended questions are posed to respondents seeking information on the factors they believe are having the biggest immediate impact on their businesses.

The overriding theme of respondents was cut-throat competition. “Area banks are getting aggressive in seeking consumer loans, with several rate promotions,” said one lender.

“Competition for loan demand is getting more and more aggressive with our competitors offering longer terms,” said another.

Another concern of lenders is the time and cost involved in complying with new government regulations. Community banks, in particular, are chafing at requirements that were drawn up with too-big-to-fail institutions in mind. “The regulatory burden is oppressive and damaging our business,” said one banker. “Examiners are overbearing.”

While most lenders welcomed the resurgence in residential real estate and the willingness of businesses to make investments in technology, others worried that the economy may ultimately overheat because low interest rates are fueling bubbles in the stock market, farmland and commercial real estate.


The Index of Banking activity is a diffusion index made up of 11 equally weighted sub-indicators that summarize various business activities, such as loan activity (e.g. applications, approvals, delinquencies and loans outstanding), loan pricing, deposit account activity, staffing, and business and real estate conditions.

Respondents are asked whether each sub-indicator increased, decreased or had no change from the previous month. Responses do not include opinions, intentions or expectations, although bankers were given the opportunity to comment about market conditions.


Monthly readings of American Banker's Index of Banking Activity will be presented as a time series that can be used to monitor the prevailing rate and direction of change in banking business cycles and eventually to benchmark whether an institution is operating in line with overall industry needs.

About American Banker Research
American Banker Research is a unit of American Banker, the flagship information brand of the diversified B-to-B media company SourceMedia. American Banker Research brings a full range of professional research capabilities to companies and executives in banking and payments. The unit manages the American Banker Executive Forum, a community of senior banking and payments executives who are committed to regularly sharing opinions and insights with the editorial and research groups at American Banker. Members include qualified professionals who read American Banker and its sister brands Bank Technology News and PaymentsSource, and attend their professional conferences. These include C-level executives and other senior professionals employed at commercial and community banks, bank holding companies and other financial companies across all asset classes.

About SourceMedia
SourceMedia, an Investcorp company, is a business to business media and marketing solutions company serving the financial industry and the related fields of professional services and technology. SourceMedia offers its clients and subscribers professional information services, industry-standard research, data applications, in-depth seminars and conferences, and specialized marketing services.

About VantageScore Solutions
VantageScore Solutions, LLC ( is the independently managed company that owns the intellectual property rights to the VantageScore credit scoring models, including the recently announced VantageScore 3.0 model which provides up to 25 percent predictive improvement over earlier models and has the ability to formulate a score for 30 – 35 million previously unscoreable consumers. Initially developed by America’s three national credit reporting companies (CRCs) — Equifax, Experian and TransUnion — VantageScore Solutions’ highly predictive models use an innovative, patented and patent-pending scoring methodology that provides lenders and consumers with more consistent credit scores across all three national credit reporting companies.

For more information, please contact:

Dana Jackson

Richard Melville richard.melville(at)sourcemedia(dot)com

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