PYMNTS MonitorEdge May 2024

Banks Report Lending Slows as Corporate Borrowers Pay Down Debt

The largest U.S. banks are reporting a slowdown in lending.

Bank of America and PNC were the latest to do so, with the former reporting Tuesday (April 16) that lending was “sluggish” and the latter saying its lending dropped 1%, the Financial Times (FT) reported Tuesday.

With their earnings reports released Tuesday, they joined three other top banks — CitigroupJPMorgan Chase and Wells Fargo — that reported drops in lending among their first-quarter results last week, according to the report.

The report attributed the slowdown in lending to corporate borrowers choosing to pay down their debt amid high interest rates.

Bank of America executives said during a Tuesday earnings call that they did not see the trend as a sign that the economy is worsening. Instead, they said, consumer spending remained healthy and corporate customers chose to pay down debt.

PNC reported Tuesday that while its total lending dropped 1%, its consumer loans dropped less than 1%, while its commercial loans decreased 2%. The bank attributed the decline in commercial loans to “lower utilization of loan commitments and paydown outpacing new production.”

“We’ve seen capital spend and inventory build be next to nothing, even though capacity utilization is high and retail sales are high,” William S. Demchak, chairman, president and CEO of PNC, said during the company’s quarterly earnings call. “At some point, that’s got to give, but I do think there continues to be hesitancy, by manufacturers in particular, just in the face of the economy.”

During JPMorgan’s earnings call on Friday (April 12), Chief Financial Officer Jeremy Barnum said consumers remain financially healthy, supported by a resilient labor market, and their overall spend is in line with prior years.

Later in the call, Barnum noted at least some pressure on some consumers, adding that “the extra money of the lower-income folks … normalizing, as you see credit normalizing a little bit.” But, generally speaking, “the customers are in pretty good shape, and even if we go into a recession, they’re in pretty good shape.”

Wells Fargo reported during its earnings call on Friday that it continues to see strength in the economy.

“Spending patterns and consumers using our debit and credit cards remain generally consistent and continue to grow year over year,” CEO Charlie Scharf said during the call.