NEW YORK, NY -- (Marketwire) -- 03/11/13 -- The American Banker Index of Banking Activity (IBA) registered a reading of 53.8 for the month of January, declining from 56 a month earlier and hitting its lowest level since the index began tracking banker sentiment last June. (Read full article: http://www.americanbanker.com/issues/178_41/slower-loan-growth-dumps-ice-on-january-s-index-of-banking-activity-1057160-1.html.)
The reversal of fortune from December's statistical readings as well as commentary from bankers suggest accelerated activity at year-end ahead of the so-called fiscal cliff may have cannibalized growth in early 2013.
The IBA tracks the level of business activity across a range of factors that are fundamentally important to the commercial banking business. Composite readings above 50 indicate an expansion of activity and readings below 50 point to contraction. The farther from 50 a reading is, the stronger the indicated change.
The IBA is a product of American Banker's regular surveys of banking executives and is published in partnership with VantageScore Solutions. The latest installment of the index was based on 312 responses to surveys.
BANKING INDUSTRY CONDITIONS
January's reading for consumer loan applications dropped to 49 from 54.5 a month earlier while commercial lending also lost steam. The reading for commercial loan applications declined to 54.2 in January from 57.8 in December.
In addition to a slowdown in loan applications, there was a decline in loan growth. January's reading for outstanding loans plummeted to 52.8 from 61.2 a month earlier, suggesting that strong growth in December ahead of tax increases may have put a damper on January expansion. "December had a spike in activity with 2012 tax moves, particularly in the real estate space," said one banker.
Pricing on consumer loans was one area where intense pressure seemed to abate a bit. The component that tracks consumer loan pricing registered a reading of 48.9, up from 44.4 in December -- still in negative territory but closer to stability.
A number of other categories that make up the IBA, including sentiment for market conditions and loan rejections, showed little change from December.
WHAT RESPONDENTS ARE SAYING
In addition to the quantitative elements of the survey that support the IBA, open-ended questions are posed to respondents seeking information on the factors they believe are having the biggest immediate impact on their businesses.
The anticipation of sequestration -- $85 billion in automatic spending cuts that kicked in on March 1 -- helped drag down banking conditions in January, according to bankers. "We are bracing for the psychological effects of sequestration coming in March," said one lender. "I think we could grow out of this mess if politicians would just get out of the way."
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