Some of the country’s biggest financial institutions are sitting on a pile of cash and untapped credit, with JPMorgan and Bank of America holding close to $1 trillion in credit commitments, The Wall Street Journal (WSJ) reported on Wednesday (Aug. 4).
Bankers are hoping that unused business credit will trigger a spending rush in the months ahead. They also said that companies have been stepping up requests for credit lines, and asking that the credit can be easily tapped for spending on talent, inventory and more.
One issue at hand is supply chain snarls and worker shortages, both of which are stifling companies’ ability to spend the money available to them. Bankers, however, see signs that business spending is about to detonate, per the the news outlet.
See also: Banks Seek To Temper Deposits From Corporates
Bank of America CEO Brian Moynihan recently told analysts that the economy will get a boost as people keep spending money and employers keep hiring, “and hopefully will result in more line usage on our loans,” he said, per WSJ.
There is no interest income to banks when holding unused credit and lenders have been trying to increase the number of loans extended. As such, financial institutions have made it easier for companies to gain access to the maximum amount of credit.
A July Federal Reserve survey showed that banks are getting more requests from corporate borrowers about obtaining new and increased lines of credit, per the WSJ.
Healthcare firms, food products, wholesale, and industrial are areas that banking heads have seen an increase in the demand for new credit.
Read more: Bankers Worried Over Credit Card Balances Paid In Full
JPMorgan indicated that a June survey of commercial banking clients showed that business confidence was at an all-time high. Some 46 percent of respondents said they expected to up capital spending and 38 percent indicated they would need to add to their credit availability.
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