American Banker Index of Banking Activity Dips Amid Anxiety Over Government Shutdown
New York, NY (PRWEB) November 20, 2013 -- Fears over the potential impact of a then-looming government shutdown cast a pall over the banking industry in September, according to the latest American Banker Index of Banking Activity (IBA). The composite index reading of 55.8 was down from the previous month’s 56.9 and marked its fourth consecutive decrease.
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.
While September’s reading is still indicative of modest growth, the IBA has been declining steadily ever since June’s sudden increase in long-term interest rates. Based on comments from survey respondents, concern about the shutdown – which eventually did come in October – had particular impact on components that track consumer lending activity. (View article: http://www.americanbanker.com/issues/178_213/credit-quality-consumer-lending-wane-in-latest-index-of-banking-activity-1063383-1.html)
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 290 responses to surveys. The most recent data is based on a survey conducted in October.
BANKING INDUSTRY CONDITIONS
Consumer lending was caught in the crosshairs of turmoil in Washington and rising interest rates. Consumer loan applications contracted to 48.2 in September compared to 52.2 in August. The component that tracks approvals for consumer loans dropped to 47.7 in September from 52.1 the previous month. Consumer credit quality also showed signs of further deterioration. Consumer delinquencies registered 62.7 in September, compared with August’s reading of 61.
Commercial loan activity, while stronger than that in the consumer space, showed signs of ebbing momentum. The commercial-loan-application component dipped to 57.1 in September from 59.2 in August. Commercial loan approvals also dropped slightly to 56.4 from the previous month’s 57.5.
A relative bright spot came from staffing, which showed signs of a reversed course after the previous month’s weak index. This month’s staffing component registered 63.2 compared with 47.8 in August.
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.
The government shutdown, which came and went in October, sparked fear among bankers. One respondent remarked about “the challenging business environment due to overall economic apathy and government dysfunction.” Another said the events in Washington “put a damper on Small Business Administration and mortgage lending.”
Others are still feeling the blowback from higher interest rates. “Interest rate increases significantly decreased loan demand and mortgage applications,” a banker commented.
One banker explained the opposing forces of consumer and commercial lending. “Commercial activity is improving and residential construction is good. I believe that there is weakness in the consumer mortgage market and consumer lending business as a result of regulatory uncertainty… this has caused an overall chill on [our] banks’ willingness to make consumer loans,” the banker said.
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 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.
Contact
For more information, please contact:
Dana Jackson
dana (dot) jackson (at) sourcemedia (dot) com
212.803.8329
Richard Melville
richard (dot) melville (at) sourcemedia (dot) com
212.803.8679
Jeannie Nguyen, SourceMedia, Inc., http://www.sourcemedia.com, 212-803-8324, [email protected]
Share this article