Fed’s Senior Loan Officer Survey – credit turning favorable

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This post is a guest contribution by Asha Bangalore, economist of The Northern Trust  Company.

The latest Senior Loan Officer Survey of the Fed shows that overall credit market conditions are moving in the desired direction but demand for loans was soft. Loan underwriting standards for large and small firms remained favorable in the second quarter (see chart 1), with a few bankers easing standards.

The terms of loans were easier for all firms in the first quarter vs. the fourth quarter, but more so for large firms compared with small firms (see chart 2).

Chart 3 indicates that bankers had lowered standards for commercial real estate loans but demand was weak but improving.

News from the housing sector is shaky, with demand for mortgage loans weak despite banks easing underwriting standards (see chart 4)

Chart 5 indicates that bankers were willing to lower standards for consumer loans excluding credit cards; few bankers remained wary of credit card borrowings.

The banking industry also shows an overall change in outlook toward consumer loans. More bankers were willing to extend consumer loans in the first quarter compared with the previous quarter (see chart 6).

Source: Northern Trust – Daily Global Commentary, May 3, 2010.

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