Banks are lending less

Daily Data: Total bank credit is negative YoY, but some types of loans are still growing

Random Walk was surprised to learn which category of loan was keeping bank lending afloat. Perhaps you will be too.

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Daily Data

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Banks are lending less

You can add this to the ongoing mystery of “if things are slowing down, then why aren’t they slowing down?”

Banks are definitely lending less than they were before, which should matter for an economy driven in large part by lending, but certain categories of lending still are growing.

At a high level, total bank credit is negative on a YoY basis:

“Loans and leases,” however, are still growing, albeit growth is rapidly decelerating.

So total credit is negative and bank lending growth is now slightly below pandemic levels.

The reason Total Bank Credit is negative, while Loans and Leases is merely decelerating, is because of the steep reduction in the securities held by banks—y’know, the Treasuries and Mortgage Backed Securities with painfully low interest rates that reflect all those “unrealized losses.”

That’s good.

Banks need to get that stuff off their books and replace it with higher yielding stuff, which is apparently what they’re doing, although (again) with decreasing alacrity.

Lending growth is driven by what now?

That lending itself is up, still seems like a bit of a miracle.

It’s also a bit of a puzzle, if you dig into the numbers a bit.