Spate of small business lending commitments by banks

A meeting yesterday between Vice President Biden and 13 U.S. banks has resulted in a number of these banks announcing or reiterating small business loan commitments.  The banks include:

  • Chase: announced that it was on track to increase small business lending this year by 20% over 2010 levels, to $12 billion
  • Citi: committed to lend $24 billion to small business over the next three years ($7 billion in 2011, rising to $9 billion in 2013)
  • KeyBank: committed to lend $5 billion to small businesses over the next three years
  • M&T Bank: pledged to increase small business lending by $50 million over 2010 levels for each of the next three years

For banks, making such a commitment is important, as it acts as a rallying point around which resources can be concentrated.  Having a specific commitment also implies that the bank’s senior management has approved the objective, another key criterion for success.

However, announcing a specific lending commitment is only a first step.  For banks to achieve a small business lending objective, they need to design and implement an integrated plan that encompasses a wide range of activities, including:

  • Customer and competitive intelligence
  • Segmentation and targeting
  • Data mining
  • Product, service and offer development
  • Marketing communications
  • Merchandising
  • Sales channel optimitization (including structuring, incentives, training, and ongoing sales support)

In addition, these activities needs to be organized around customer needs and bank opportunities at various stages of the customer lifecycle:

  • Acquisition
  • Oonboarding
  • Cross-sell
  • Retention
  • Ongoing relationship development

For more insights in developing effective small business banking operations, see our white paper on The Transformation of Small Business Banking in the Thought Leadership section of the EMI Strategic marketing website.

Small business lending trends from banks’ 1Q11 financials

Most banks do not break out small business lending data in any greater detail in their quarterly financials, but Bank of America and Chase both provided some interesting (and contrasting) small business lending-related metrics when they published their first quarter 2011 results last week:

  • Chase grew business banking originations 57% y/y, to $1.4 billion.  In addition, end-of-period business banking loans rose for the second consecutive quarter, to $17.0 billion.  In presenting the quarterly financials, JPMorgan Chase CEO Jamie Dimon claims that the bank is starting to see real small business loan demand
  • Bank of America’s small business loan charge-off rate fell for the sixth consecutive quarter, declining 45 bps from 4Q10 to 8.68% (this is the lowest rate since 1Q08).  However, its small business loan portfolio continued to decline, falling 2.8% in the quarter to $14.3 billion at the end of 1Q11 (although the rate of decline is falling)

So while Bank of America remains focused on getting credit quality under control, Chase has forged ahead and is growing its small business franchise.  As other national and regional banks publish their quarterly financials over the next week, it will be interesting if any other bank has started to grow its small business loan portfolio.

Change in C&I Lending Trend?

The latest Federal Reserve update on Assets and Liabilities of Commercial Banks in the U.S. ( reported that commercial and industrial lending rose$2 billion, to $1,374 billion in the week ended October 228, 2009.  This is a break is the long and consistent decline in C&I loans (with a fall of 13% since September 2008).  However, it is too premature to say whether this is a blip, or whether the decline in such lending has plateaued.