American Banker Index of Banking Activity Shows Lending Outpaced Pricing Pressures
NEW YORK, NY (PRWEB) July 25, 2013 -- The most recent American Banker Index of Banking Activity (IBA) registered a reading of 59.2 in May, up from the previous month’s level of 57.5 and close to March’s reading of 60.6, which was the highest level since the index began tracking banker sentiment last June. The most recent data is based on a survey conducted in June. (View article: Accelerated Loan Approvals Boost Index of Banking Activity)
Competition continues to put pressure on pricing, but there was evidence in the most recent index that the intensity of pricing pressure was abating somewhat on the commercial side of the business. At the same time, lending activity showed strong momentum in May, as indicators tracking both consumer and commercial loan approvals increased. The reading for consumer loan approvals rose to 61.9 in May from 59.1 a month earlier while commercial loan approvals edged up to 62.7 in May from 62 in April.
Applications for consumer loans continued to pick up steam in May while commercial loan applications declined slightly.
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.
BANKING INDUSTRY CONDITIONS
Price competition continues to weigh heavily on both consumer and commercial loan revenues, according to the IBA. In May, the 47.6 reading for consumer loan pricing indicated continued weakness. However, on the commercial side, the 43.9 reading for loan pricing was much improved from the 35.8 registered in April.
A bright spot for the industry was that hiring accelerated in May, as the headcount reading reached 51.7, up from 48.5 in April, when bankers reported paring payrolls.
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.
Bankers reported there appears to be no let-up in the high-speed chase for consumer business. “Area banks are getting aggressive in seeking consumer loans,” said one respondent, noting there were several rate promotions in his area.
“Loan demand seems to be increasing,” said one another. “However, there are multiple banks and credit unions going after the same customers.”
As in recent months, some banks worried that bubbles are forming in the stock market, farmland and commercial real estate due to the extended period of low-interest rates as a result of the Federal Reserve’s quantitative easing program.
Several respondents reported they are seeing the effects of government cutbacks due to so-called sequestration in areas such as tourism because of delays in opening up national parks. “Sequestration is starting to impact the local economy,” said one lender.
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.vantagecore.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.jackson(at)sourcemedia(dot)com
212.803.8329
Richard Melville
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212.803.8679
Jeannie Nguyen, SourceMedia, Inc., http://www.sourcemedia.com, 212-803-8324, [email protected]
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