Sep 22, 2017 - Commercial & industrial bank ... Bank loans to small business has also ..... N.A. operated 365 branch
Financial Market Weekly CHRISTOPHER S. RUPKEY, CFA MANAGING DIRECTOR CHIEF FINANCIAL ECONOMIST ECONOMIC RESEARCH OFFICE (NEW YORK) (212) 782-5702
[email protected] MUFG | 1251 Avenue of the Americas New York, New York 10020
22 SEPTEMBER 2017
A member of MUFG, a global financial group
COMPANIES HAVE STOPPED BORROWING THIS YEAR UNDER PRESIDENT TRUMP 2200
2200
Commercial & 2100$billions Commercial & industrial bank 2100 Sep 6 loans are at record highs for 2017 industrial bank loans this business cycle... 2097.9 2000 2000 (C&I loans) have the greater the demand for 1900 1900 credit the more interest rates Dec stopped their vigorous 2012 are supposed to go up 1800 1800 $85bln rising trend this year Peak Fed monthly $1,598.2 liftoff 1700 1700 QE 10/22/08 Dec 16 as it looks like First Fed 2015 rate cut 2007-09 1600 1600 1/3/01 companies have recession 1500 2016 1-year, borrowed enough 1500 Peak Q1 0.40 9 month Final Fed $1,104.1b Q2 0.45 1400 -26.3% rate hike 2/28/01 Q3 0.42 already for this long 1400 slide to 5.25% Q4 0.41 Sep 10, 6/29/06 2017 1300 2008 economic expansion. 1300 1,118.0 Q1 0.30 3-year, pre-LEH Q2 0.37 3 month MER-AIG 1200 Business loans are 1200 Q3 -21.7% 1,505.2 Q4 slide Bottom 1100 down 0.4% this year 1100 $864.3bln Bottom 5/12/04 $1,178.2b Charge-off rates 7/21/10 1000 through September 6 1000 Mar-Nov 2001 100 largest banks recession after rising 7.1% in 900 900 .20 .24 .48 .99 2.36 1.71 0.79 0.42 0.27 0.20 0.23 0.42 0.34 .81 1.49 1.93 1.36 .50 2016, the final year of 800 800 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Obama’s second term in office. C&I loans rose 10.6% in 2015, 12.3% in 2014, and 6.2% in 2013. The Fed cut rates to zero in December 2008 and C&I loans eventually turned back up a year and a half later in July 2010. Now you can either think the Fed’s second rate hike this cycle in December 2016, and two more in 2017, have increased borrowing costs and dissuaded additional borrowing. Or more likely the long expansion has led companies to borrow enough for now, in which case tax reform is unlikely to lead to new borrowing and new investment. Sounds like Washington is going to try to increase the budget deficit with tax cuts which has never been attempted before in modern economic history… given where we are in the business cycle. Fiscal stimulus is ordinarily taken up by lawmakers when the sky is falling and the economy is in recession. Not when the economy has reached the nirvana of full employment where everyone has a job. 1
Financial Market Weekly | 22 September 2017
Bank loans to small business has also slowed in the June 2017 call report rising 2.8% from the prior year. Maybe small business has all the free money they need as well although the prime rate is 4.25%. Of the 2017 $5.8 billion increase in small business loans to $337.0 billion, most of the increase was in loans made that were less than $100,000. Bank lending isn’t a leading indicator of the broader economy, but the slowing trend should be monitored.
90 %
Senior Loan Officers Survey Net Percentage Reporting Tighter Lending Standards
80 70
Mar -Nov 2001 recession start
60
Tighter credit after 2015 oil crash is over
Q2 08 55.4% preLehman
50 40 1998 Global financial markets crisis
30 20
July 2017 -3.9
Dec 2007 Jun 2009 recession start
Fed rate hikes start
10 0 -10
-30
The Great Recession
Fed rate hikes start
-20
90
91
92
93
94
95
96
97
98
99
Fed rate hikes start
00
01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
16
17
350
Bank Loans to Small Business $billions
Trump February 3, 2017 “Frankly, I have so many people, friends of mine that have nice businesses that can’t borrow money, they just can’t get any money because the banks just won’t let them borrow because of the rules and regulations in Dodd-Frank.”
Q2 2017 $337.0b
Loans made that are less than $1 mln
2.8%
325 5.2%
Loans outstanding on June 30 call dates 10.2% 2007 looked too much
300
4.6%
The Great Recession 3.4% 2.6%
275
Q2 2017 $152bln $54bln $129bln $337bln
250 2001 Recession
225
99
00
01
02
03
04
05
06
07
by loan size
