NEW YORK, NY -- (Marketwire) -- 02/20/13 -- The American Banker Index of Banking Activity (IBA) logged a reading of 56 for the month of December, finishing 2012 with five consecutive strong readings.
The results for December, the latest month for which information is available, were the highest since the IBA was launched in June and marked a slight uptick from the level of 55.8 registered in November. (To view the entire article, visit: http://www.americanbanker.com/issues/178_25/business-optimism-lifts-december-s-index-of-banking-activity-1056479-1.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 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 246 responses to surveys.
BANKING INDUSTRY CONDITIONS
One of the highlights of the December survey was the reading for in-market business conditions, which reached 56.6, rebounding from a decline a month earlier.
In-market real estate conditions also ticked up slightly, hitting 59.7. Several bankers cited a slowly improving housing market as well as an increase in applications to finance rebuilding and renovations in the wake of Superstorm Sandy.
The component tracking hiring retreated a bit December, registering a reading of 49.1, vs. a relatively strong level of 52.1 in November. "Head count remains a priority to keep at a minimum," said one banker.
Consumer loan applications picked up momentum in December, turning in the best showing since August with a reading of 54.5. The pace of approvals for those loans also showed improvement, with a 54.8 reading in December.
The IBA also showed a pickup in applications for commercial loans, although approvals declined from 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 noted that both businesses and consumers like to end the year on a high note, pointing to strong deposit growth due to "normal customer window dressing for year-end reporting purposes," in the words of one lender.
Across the country, bankers pointed to gradual improvement in the real estate market. Some noted accelerated housing transactions before year-end were made in an effort to avoid anticipated higher taxes because of the so-called fiscal cliff, which was averted due to a compromise between the White House and Congress.
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.
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.
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.
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