EMI analysis of 14 leading U.S. banks found 7.4% y/y growth in commercial and industrial (C&I) loans in the first quarter of 2014, down from a 7.9% y/y growth rate in 4Q13. Though three banks (Capital One, Fifth Third and Regions) reported double-digit loan growth, only Capital One exceeded the 4Q13 y/y growth rate. Six of the 14 banks—including two of the top three commercial lenders: Wells Fargo and Chase—had lower y/y growth in 1Q14 vs. 4Q13.
In addition, as banks compete aggressively for commercial loans in the current low interest rate environment, yields continue to decline. Of the 13 banks providing C&I loan yield data, all reported double-digit y/y basis point declines. Banks with the largest y/y declines included Fifth Third (-55 bps to 3.35%) and KeyBank (down 49 bps to 3.29%). For nine of the 13 banks, yields are now below 3.5%.
In spite of the slight decline in C&I loan growth rates, this loan category continues to propel overall bank loan growth. While the 14 banks generated total y/y loan growth of 2% in 1Q14, their non-commercial loan growth was just 0.4%.
- Target specific geographic markets or vertical industry segments, where the bank already has—or can quickly develop—dedicated capabilities
Re-commit to the small business segment by providing services and support tailored to their unique characteristics and needs
Develop initiatives to increase commercial loan utilization rates (which continue to trail historic averages for many banks, although many banks did highlight recent growth in utilization rates)
Identify and dedicate resources to capture growth in particular loan categories (such as CRE), which have been ignored in recent years in the aftermath of the financial crisis