Banking Conditions Survey, September 2019
The Eleventh District financial sector has shown some signs of slower growth over the past six weeks, according to survey respondents. The loan volume and loan demand indexes, key measures of credit activity, remained positive but fell. This suggests growth continued but at a slower pace than in the prior period.
Survey respondents indicated that while loan volume growth continued at the same or even slightly faster clip for real estate loans, volumes declined for commercial and industrial (C&I) and consumer loans. Nonperforming loans decreased slightly over the period, with the index coming in at -1.8, although there was variance by loan type.
Total loan pricing turned negative for the first time in the three-year history of the survey, with the index falling dramatically from 5.0 to -31.0. Credit standards and terms tightened in the C&I, commercial real estate (CRE) and consumer loan categories, while residential real estate loan standards eased.
Survey respondents indicated that general business activity has expanded at a much slower clip since the previous survey, with the index falling from 27.1 to 7.0.
According to respondents, core deposit volumes and cost of funds also increased much more slowly over the past six weeks. The cost of funds index dropped to the lowest level in the three-year history of the survey, from 50.8 to 5.2, while the core deposit index fell from 17.5 to 5.3. The noninterest income index pushed further positive, while the net interest margins index remained negative.
The outlook for the Eleventh District financial sector is less optimistic than it was six weeks ago. Expectations for total loan demand six months from now point toward no growth. Nonperforming loans are expected to increase slightly over the next six months. Finally, expectations for general business activity fell notably, with the index dropping from -1.7 to -19.3.
Data for this report were collected August 6–14, and 58 financial institutions—49 banks and nine credit unions—responded. The Federal Reserve Bank of Dallas conducts the Banking Conditions Survey twice each quarter to obtain a timely assessment of activity at banks and credit unions headquartered in the Eleventh Federal Reserve District. CEOs or senior loan officers of financial institutions report on how conditions have changed for indicators such as various loan types, deposits and loan pricings. Respondents are also asked to report on their banking outlook and how they perceive broader economic conditions to have changed (general business activity).
Questions regarding the Banking Conditions Survey can be addressed to Matt Davies at firstname.lastname@example.org.