U.S. banks keep business loan standards unchanged in fourth quarter

WASHINGTON (Reuters) - Loan officers at U.S. banks reported leaving lending standards for businesses and most commercial real estate unchanged in the fourth quarter, a Federal Reserve survey showed on Monday, although they expect to tighten standards for most types of business loans this year.

FILE PHOTO - U.S. dollar notes are seen in this November 7, 2016 picture illustration. REUTERS/Dado Ruvic/Illustration

The officers also said they were seeing weaker demand for business loans from firms and that interest in most commercial real estate loans was unchanged.

For household loans, it was a mixed picture with loan standards unchanged for residential real estate loans but a less rosy picture for credit cards and auto loans.

“Banks reportedly tightened their lending standards on credit card and auto loans, while demand remained unchanged for credit cards and weakened for auto loans,” the U.S. central bank said in its quarterly survey.

U.S. banks previously reported keeping loan standards mostly unchanged for many business loans while tightening commercial real estate loans in the third quarter.

Last week the U.S. central bank kept interest rates unchanged and continued to signal that it plans to hold them steady for the foreseeable future unless there is a material change in the U.S. economy.

The coronavirus outbreak in China has already rattled world markets and a senior Fed official on Friday called it a “wildcard” that could pose risks to U.S. growth if the economic harm to China is sustained over a long period.

Loan officers were also asked about their outlook for this year as part of the latest survey. Their responses showed that they expected to tighten loan standards for most business, credit card and auto loans, and expected demand to hold steady for most types of loans.

They did, however expect some deterioration in loan performance. “Credit card and auto loans to nonprime borrowers stand out as the loan categories for which the largest net shares of banks expect a deterioration in loan performance over 2020,” the Fed said.

The Fed surveyed loan officers at 74 domestic banks and 22 U.S. branches and agencies of foreign banks.

Reporting by Lindsay Dunsmuir; Editing by Andrea Ricci