Check out this opening in today's WSJ:
Carl DelPrete, chief executive of suburban New York supermarket chain Uncle Giuseppe's Inc., couldn't be happier with the current lending environment. To fund a recent expansion, he got bids from three banks and calls the terms on the $14 million loan "the best we're ever going to see in our lifetime."
Now try on this lede from Bloomberg, posted last night:
The biggest U.S. banks including JPMorgan Chase & Co. and Citigroup Inc. are lending the smallest portion of their deposits in five years as cash floods in from savers and a slow economy damps demand from borrowers.
All right, so which is it? Would you believe both are true? Actually, bank lending has been one of the thorniest aspects of the recovery - and one of the least understood. The way some bankers tell it, they have plenty of money to lend - just not enough folks who are confident enough to borrow. The way some business owners tell it, banks have plenty of cash, but post-recession capital requirements have restricted lending. While loan-to-deposit ratios at JP Morgan and Citigroup are down, they're unchanged at Wells Fargo and U.S. Bancorp, and they're up at PNC. One explanation for this mixed lending bag is the nature of the loans themselves. Banks are being squeezed because higher-yielding real-estate loans are being replaced with lower-yielding commercial loans. As a result, they might be less willing to cut deals. Whatever the explanation, the economy is not about to shift into higher gear unless all bankers become more comfortable with the current environment. From the Journal:
The profitability of the loans that banks are making is under pressure. More than half of banks surveyed in the quarterly Federal Reserve survey of loan officers said that lending spreads--a rough gauge of profit that measures the gap between the rates at which a bank borrows money and lends it out--had narrowed in the past three months. The survey said standards on loans to medium and large firms eased for the fourth quarter in a row. Respondents "cited more-aggressive competition," the Fed said. [Paul Miller, an analyst with FBR Capital Markets,] said lenders are learning they must in many cases "let deals walk" because terms are becoming too risky.