UPDATE 1-Fed says U.S. banks eased standards in last three months

Mon May 5, 2014 4:01pm EDT

(Adds detail on credit cards and context from FOMC meeting last week)

NEW YORK May 5 (Reuters) - Banks eased lending standards for U.S. commercial loans as well as credit card and auto loans in the last three months while demand for the loans increased, continuing the pattern of the last few quarters, the Federal Reserve said on Monday.

Banks on balance "eased their lending policies for commercial and industrial and commercial real estate loans and experienced stronger demand for both types of loans over the past three months," the U.S. central bank said in its quarterly survey of senior loan officers.

The poll, which covered 74 U.S. banks and 23 U.S. branches of foreign banks, found that key forms of consumer credit also expanded.

The results point to a potential strengthening of consumer spending in coming months, with growth in credit card loans in particular beginning to increase after years of decline.

In announcing a reduction in its bond-buying stimulus last week, the Fed said household spending "appears to be rising more quickly" - a factor that helped it conclude that the economy was beginning to strengthen after a winter lull.

The loan officers expect that trend to continue.

Credit card loans declined four years running, from 2009 to 2012, before increasing a modest 0.8 percent in 2013.

In the survey, 37 percent of loan officers said that demand for credit card loans from the most creditworthy borrowers had increased last year. More than half said they expected the trend to accelerate through 2014, while 23 percent said they expected demand among less creditworthy borrowers to increase as well.

The latest quarterly survey "provided further indication of a thawing in the credit channel," said Millan Mulraine, deputy head of U.S. research and strategy for TD Securities.

The Fed is still providing very accommodative monetary policy more than five years after the end of the 2007-2009 recession, and increasing bank lending is a big part of its overall stimulus plan for the world's biggest economy.

In the survey results, the Fed said banks eased standards on consumer credit card and auto loans, but tightened standards on nontraditional closed-end mortgage loans.

More banks reported weaker demand for each type of residential real estate loans, while more reported stronger demand for credit card and auto loans, the Fed said. (Reporting by Jonathan Spicer; Additional reporting by Howard Schneider in Washington; Editing by Chizu Nomiyama and Tom Brown)

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