NEW YORK, NY -- (Marketwire) -- 01/17/13 -- The American Banker Index of Banking Activity (IBA) logged a reading of 55.8 for the month of November, as business activity expanded and hiring accelerated.
The results for November, the latest month for which information is available, were the highest since the IBA was launched in June, when the overall reading was 54.4 percent. (Read more at http://www.americanbanker.com/issues/178_5/index-of-banking-activity-rises-on-hiring-improved-consumer-lending-1055629-1.html)
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 composite number has been above 50 in each of the four months that it has been tabulated.
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 253 responses to surveys.
BANKING INDUSTRY CONDITIONS
One of the highlights of the November survey was the reading for staffing, which reached 52.1, the highest tally since the inception of the index and rising from 46.6 in October. This reading indicates that more banks are expanding, rather than reducing, staffing.
Another bright spot was an accelerated pace of consumer loan applications, which logged a reading of 52.1, vs. 50.3 a month earlier. Approval for those applications reached 52, up from 51 in October.
Commercial lending, which was a standout in the October survey, cooled off a bit in November as applications for commercial loans registered a 55.3, down from 60.1 in October. The reading for loan approvals declined to 57.5 from 59.4 the previous month. Both readings, however, remain in expansionary territory.
Optimism for business conditions also retreated in November in the period following Superstorm Sandy, which hit the Northeast in late October. Banks' in-market business conditions logged a reading of 53.9, vs. 57.8 a month earlier.
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.
Several bankers in New York and New Jersey noted their business had been affected by Sandy, which led to power outages and gas shortages. Many pointed to the uncertainty created by the so-called fiscal cliff, when tax hikes and government spending cutbacks were due to begin phasing in on January 1. Lawmakers reached an 11th-hour compromise to avert the cliff in early January.
HOW THE INDEX WORKS
The Index of Banking activity is a diffusion index made up of 11 equally weighted sub-indicators that summarize various business activities, such as loan activity (e.g. applications, approvals, delinquencies and loans outstanding), loan pricing, deposit account activity, staffing, and business and real estate conditions.
Respondents are asked whether each sub-indicator increased, decreased or had no change from the previous month. Responses do not include opinions, intentions or expectations, although bankers were given the opportunity to comment about market conditions.
FUTURE INDEX READINGS
Monthly readings of American Banker's Index of Banking Activity will be presented as a time series that can be used to monitor the prevailing rate and direction of change in banking business cycles and eventually to benchmark whether an institution is operating in line with overall industry needs.
About American Banker Research
American Banker Research is a unit of American Banker, the flagship information brand of the diversified B-to-B media company SourceMedia. American Banker Research brings a full range of professional research capabilities to companies and executives in banking and payments. The unit manages the American Banker Executive Forum, a community of senior banking and payments executives who are committed to regularly sharing opinions and insights with the editorial and research groups at American Banker. Members include qualified professionals who read American Banker and its sister brands Bank Technology News and PaymentsSource, and attend their professional conferences. These include C-level executives and other senior professionals employed at commercial and community banks, bank holding companies and other financial companies across all asset classes. www.AmericanBanker.com.
SourceMedia, an Investcorp company, is a business to business media and marketing solutions company serving the financial industry and the related fields of professional services and technology. SourceMedia offers its clients and subscribers professional information services, industry-standard research, data applications, in-depth seminars and conferences, and specialized marketing services. www.SourceMedia.com.
About VantageScore Solutions
Stamford, Conn.-based VantageScore Solutions, LLC (www.vantagescore.com) is an independently managed company that holds the intellectual property rights to the VantageScore model, a generic credit-scoring model introduced in March 2006. Created by America's three major credit reporting companies (CRCs) -- Equifax, Experian and TransUnion -- VantageScore's highly predictive model uses an innovative, patented and patent-pending scoring methodology to provide lenders and consumers with more consistent credit scores across all three major credit reporting companies and the ability to score more people. www.VantageScore.com.
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