American Banker Index of Banking Activity Shows Improved Momentum

Composite Reading of 56.3 is highest to date.

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IBA graphic

“The improvements in February over January were modest, but these days any improvement is a positive sign.”

NEW YORK, NY (PRWEB) April 19, 2013

The most recent American Banker Index of Banking Activity (IBA) registered a reading of 56.3, marking the highest level since the index began tracking banker sentiment last June. Data is based on a survey conducted in March, in which respondents were asked about the change in business conditions in February.

The improvement comes on the heels of the last reading’s depressed level of 53.8, which remains the lowest recorded reading.

Helping the IBA to regain its momentum was an acceleration in commercial lending, as readings for loan applications and approvals increased. See American Banker’s analysis of the latest reading.
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 265 responses to surveys.

BANKING INDUSTRY CONDITIONS

February’s reading for commercial loan applications rose to 61.5, compared to 54.2 a month earlier, while the level for commercial loan approvals climbed to 60.6 from 52.1 in January.

Seasonality could have contributed to January’s depressed results as borrowers accelerated activity at the end of 2012 to avoid paying higher taxes anticipated due to the fiscal cliff.

Another bright spot in February’s results involved bankers’ assessment of in-market real estate conditions, which had its highest-ever reading at 64.8, compared to 63 in January.

On the negative side, hiring contracted, registering a reading of 47.2 in February, down from 50.2 a month earlier. Consumer loan applications and approvals were essentially flat from January levels.

WHAT RESPONDENTS ARE SAYING

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.

In February, lenders noted that plenty of uncertainty persists in the wake of sequestration, which set in motion $85 billion in automatic government spending cuts on March 1.

“Local conditions are stable, but uncertainty reigns supreme,” one banker said. “We see several new projects coming to the area, but time will tell. The national scene, particularly the fiscal situation, is producing a lot of uncertainty.”

Said another lender: “The improvements in February over January were modest, but these days any improvement is a positive sign.”

HOW THE INDEX WORKS

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.

FUTURE INDEX READINGS

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 (http://www.vantagescore.com) 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 27 – 30 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.


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