All That Commercial Lending by Banks Suddenly Isn't Looking so Hot
There's commercial lending in them oilfields.
Photographer: Brittany Sowacke/BloombergWah-wah.*
Commercial and industrial lending, the engine of banks' loan book growth in recent years, is showing signs of cracking, thanks to the dramatic fall in the price of oil and weakness in non-consumer-related things. On Tuesday, Deutsche Bank analysts cautioned that losses on C&I portfolios could end up as high as 90 basis points in 2016, more than the 20bps loss-rate currently expected by the Wall Street bank, and far more than the 15bps loss rate reported for last year.
"Credit concerns are rising given continued pressure on oil prices (and commodities more broadly) as well as mixed U.S. economic data. If credit does weaken more than expected, many think it will show up in C&I given strong growth (+57 percent at large banks since 2010 vs. total loans +30 percent), loosening of underwriting standards and the risk liquidity declines for certain borrowers," Deutsche Bank analysts led by Matt O'Connor said in a note published on Tuesday.