Magazine article American Banker

Outlook Seen Bright for Loans, Tricky for Lenders

Magazine article American Banker

Outlook Seen Bright for Loans, Tricky for Lenders

Article excerpt

NEW YORK -- The second and third quarters of this year look bright for corporate lenders -- with improved commercial loan demand and nonperformers peaking -- but lending officers still face challenging times ahead, the president of Robert Morris Associates said here Wednesday.

Jack R. Crigger, president of the national association of lending officers, said in an interview that he believed domestic corporate lending "will probably be up in the next two quarters in spite of the fact that interest rates have picked up and perhaps leveled to some degree.

"There are a lot of underlying things that create loan demand," he said. A major factor will be the corporate need for financing that follows a resurgence in consumer credit demand. For example, he said, there will be renewed requests for financing of mergers, acquisitions, and takeovers as well as refinancing old debt.

Another important factor in the loan demand picture, he said, was the "inventory-to-sales ratio." This ratio, which compares the amount of goods held in inventory with goods sold, was 1.6 to 1 in the past two years but has dropped to about 1.3 to 1.

"It looks to me like business houses have learned to live at subsistence levels," said Mr. Crigger, "through computerization and technology. That, coupled with the fact that there continues to be some demand for product, would indicate to me they may be reaching a very, very subsistence level of inventory and it's now time to replenish. …

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