Much of the coverage of U.S. banks during the 4Q11 earning reporting period focused on their continued struggles to generate revenues, with some noninterest income categories under pressure. However, most of the big banks did show signs of growth in lending, with commercial lending at the forefront.
The table below looks at y/y and q/q changes in average non-CRE commercial loan portfolios for some of the leading U.S. banks. Of the 12 large banks listed below, eight enjoyed double-digit average commercial loan growth over the past year.
In reporting quarterly financials, most banks indicated strong potential for additional commercial lending growth in 2012, although most were at pains to point out that this is dependent on continued economic recovery and improving business confidence.
Of course, the strong growth in 2011 follows declines in loan portfolios in 2008 and 2009, and relatively anemic growth for many leading banks in 2010. Due to acquisitions and changes in organizational structures, long-term comparisons are not always relevant, but in many cases, leading banks have a long way to go to build average commercial loan portfolios up to pre-financial crisis levels. And banks also need to recognize that, while an improving economy, should boost overall commercial lending, they will need to make significant investments in marketing and sales to maintain and even build their share of the commercial loan market.
EMI recently carried out an analysis of current FDIC data on the C&I loan portfolios of U.S. banks. This analysis revealed the following trends:
- Large banks (with more than $10 billion in assets) had the strongest growth in their total C&I loan portfolios between 3Q10 and 3Q11. This is consistent with recent financials from the largest banks, most of whom have reported strong growth in commercial lending in recent quarters
- Looking at small business loan portfolios (defined as C&I loans of less than $1 million), at first glance the trend is more consistent: larger banks still outperform their smaller counterparts, but the gap is much narrower than for C&I loans.
- However, when we drill further into small business loan portfolios, we see that the largest banks grew their portfolio of very small business loans (original amounts of less than $100,000) by 5%, while the other three bank segments experienced loan portfolio declines in this category (note that this loan category has a high concentration of small business credit card loans).
There are now some indications that small business lending will grow in 2012. Will larger banks continue to outperform smaller banks in overall loan portfolio growth? And will loan growth continue to be concentrated on the smallest category of loans, or will it be extended to loans of $100,000 to $1 million?
The 4Q11 financials from both JPMorgan Chase and Wells Fargo underline the extent to which mobile banking has emerged as a key banking channel, while also indicating that online penetration may have reached a ceiling.
- Between 4Q10 and 4Q11, Chase grew its active mobile banking customers by 57%, while during the same period active online banking customers increased by 3%
- Active online banking customers as a percentage of total Chase checking customers rose from 62% in 4Q10 to 65% in 1Q11, but has remained at 65% for the three subsequent quarters. Active mobile customers as a percentage of checking customers rose from 20% in 4Q10 to 32% in 4Q11
- Active mobile customers as a percentage of active online customers rose from 32% in 4Q10 to 48% in 4Q11
- The rate of growth in active mobile customers does not yet show signs of abating. The quarterly growth rate fell from 13% in 1Q11 to 9% in 2Q11, but then increased to 10% in 3Q11 and again to 16% in the most recent quarter
- Wells Fargo:
- Active mobile customers increased 55% between 4Q10 and 4Q11. During this period, active online customers rose 8%
- Active mobile customers as a percentage of active online customers rose from 26% in 4Q10 to 37% in 4Q11