Magazine article American Banker

Rising Rates Fueled Business Lending in '94

Magazine article American Banker

Rising Rates Fueled Business Lending in '94

Article excerpt

Bank lending to businesses soared in 1994, reflecting strong corporate demand and a revival in commercial real estate finance.

Bankers tied the lending surge, evident in a newly expanded annual report by American Banker on business lending (see tables on pages 21 through 29), to the need for short-term loans at floating rates as interest rates rose during the year. Now that rates are coming back down, some observers warned that more banks will leap into riskier loans to make up for lost volume.

There are already "clear signs they've become more liberal in their lending terms," said Eugene Sherman, director of research at M.A. Shapiro & Co.

The American Banker report, which relies on data provided by Sheshunoff Information Services Inc., shows business loans on the books of the top 100 business lenders increased 8.3% during 1994 to $971.9 billion.

Over half of the business loans on the books of the top 100 were in the commercial and industrial loan category, which grew 14.1% to $498.9 billion. For all banks, including foreign banks operating in the U.S., C&I loans were up 9% to $760.3 billion for the year, after three years of declines.

Also for the first time in several years, commercial real estate lending grew significantly. Total commercial real estate loans on the books of banks totaled $397.3 billion at year end, up 4.1%.

Bankers said the real estate increase, which occurred despite sharp reductions in the real estate portfolios of most of the nation's largest banks, reflected activity by community and regional banks that offer real estate loans to local developers on conservative terms. …

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