Larger banks gaining in small business lending

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?