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 Increasing demand for bank loans often is a prelude to higher
economic growth. With the U.S. government budget crisis fixed for
now and Europe showing signs of economic recovery, companies feel
more comfortable borrowing to invest in machinery, factories, and
buildings.
JPMorgan Chase & Co Chief Executive Jamie Dimon, who has long
described himself as "cautiously optimistic" about the economy,
recently dropped the modifier "cautiously," he said on a conference
call with investors last week.
"We're using the word optimistic because we are actually
optimistic," he added.
"The sun and moon and stars are lined up for a very successful year"
in the U.S., he said the next day at a conference in San Francisco.
"I don't see any weak spots in America," Dimon said, noting that
corporations, small business, the stock market and the U.S. housing
market are all showing signs of improving.
Outstanding loans to companies reached an all-time high of $1.61
trillion at the end of last year, topping a record set in late 2008,
according to Federal Reserve data released on Friday.
Bankers say that anecdotally, business customers are more hopeful
than they had been.
"I am hearing more when I talk with customers about their interest
in building something, adding something, investing in something,"
Wells Fargo & Co CEO John Stumpf said on a conference call with
investors last week. "There is more activity going on."
To be sure, signs persist that economic growth is still tepid.
Job growth slowed sharply in December, when U.S. employers hired the
fewest workers in nearly three years, partly because of winter
storms. And while holiday sales rose 0.2 percent in December, it was
at the cost of heavy discounting by retailers.
But the U.S. grew at a relatively fast annualized 4.1 percent in the
third quarter, and General Electric — often looked to as a barometer
of the health of the U.S. industrial sector — said on Friday that it
had record orders for jet engines, oil pumps and other industrial
goods.
"We have seen some moderate strength in the U.S.," GE Chief
Financial Officer Jeff Bornstein said in an interview, even if he
cautioned that the company has not yet seen "the breakout broadly
across the economy."
Bornstein said the company's strong backlog reflects the growing
middle classes in emerging and developing countries around the
world.
"We see solid demand for loans as we head into 2014" from
businesses, particularly large corporations and healthcare
companies, along with owners of commercial real estate, Bank of
America CFO Bruce Thompson said on a conference call with analysts
on Wednesday.
U.S. consumer loans, including mortgages and credit cards, also have
been steadily rising since early 2011, according to Fed data.
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CORPORATE COMFORT
Analysts on average forecast U.S. growth of 2.9 percent in 2014,
close to the long-term average for the United States but a bit
stronger than in recent years.
Credit is the lifeblood of the economy, and lending volume has been
relatively weak since the financial crisis. Some economists fault
banks for holding onto the purse strings too tightly, while others
fault companies and consumers for being too timid to spend.
But whatever the cause, demand for credit has started to turn
around. Paul Kasriel, former chief economist at Northern Trust Co,
notes that total bank investments in loans and securities, combined
with the Federal Reserve's securities holdings, have been growing at
an accelerating pace since the fourth quarter of 2012, soon after
the Fed started its latest round of bond buying to stimulate the
economy.
Year-over-year growth for that figure was 8.7 percent in the third
quarter of 2013, the latest period for which complete data is
available, compared with an average of 7.2 percent since 1953.
Growth in this measure of credit tends to happen one quarter before
economic growth picks up, he added.
And while Fed bond buying contributed substantially to the growth,
Kasriel said, rising demand from the private sector for loans should
make up for a tapering of bond buying by the Fed at least for the
first half of 2014.
Lending is not always a long-term positive sign for the economy, as
in the run-up to the last crisis, when an explosion of bad mortgage
loans brought the financial system to its knees. But Kasriel said
lending standards had tightened since then and loans made are now of
higher quality.
Bankers are hopeful, too. "People have been feeling bad for six years. There's a natural
psychological reaction when you go through a period like that where
you just want to feel better. It doesn't take too much positive news
to make you feel better, and that's what we're beginning to see,"
said Kelly King, CEO of bank BB&T Corp.
Mike Corbat, CEO of Citigroup Inc, the most international of the big
U.S. banks, said on Thursday that the outlook for economies around
the world is better now than last year.
"Growth looks better. Economies continue to heal," he said.
(Reporting by David Henry, Peter
Rudegeair, Michael Erman and Lewis Krauskopf in New York and
Poornima Gupta in San Francisco; editing by Dan Wilchins, Peter
Henderson and Steve Orlofsky)
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