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Business Lending Up Nationwide, Fed Report Says

SEP 3, 2014 4:54pm ET
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WASHINGTON Demand for business loans jumped across the country during the past six weeks, according to a report issued Wednesday by the Federal Reserve Board.

In its "Beige Book," the central bank said that demand for commercial and industrial loans increased in New York, Cleveland, Richmond, Chicago, St. Louis and Dallas, while reports from the Philadelphia district were "mixed."

"Demand for C&I loans was greatest among manufacturers, energy and health care providers," the Cleveland Fed said.

Since the July 16 Beige Book, demand for auto loans also continued to increase.

"The Cleveland and Atlanta districts reported very strong auto loan demand" while Philadelphia, Chicago, Richmond, St. Louis and San Francisco districts also experienced growth in auto lending, the report said.

Credit quality also improved.

"The Philadelphia, Dallas and San Francisco districts reported that credit quality improved further, while New York and Cleveland stated that delinquency rates fell across all loan categories," the report said.

"Overall, banking conditions continue to improve from the prior Beige Book period" and loan volumes increased in nearly all Federal Reserve districts, according to the Fed's periodic review of economic and financial activity in the U.S.

Commercial real estate lending, meanwhile, held its own. The New York, Cleveland, Richmond, Chicago and San Francisco districts reported "slight to moderate growth" in CRE lending.

"A little over half districts reported some degree of growth in non-residential real estate activity, with increased construction, leasing or both tied to steady or falling vacancy rates and to rent increases," the Beige Book said.

However, "demand for residential mortgages was less robust," according to the report. Contacts in the Philadelphia, Chicago and Dallas districts reported "slight" increases in mortgage demand, but other districts cited no change or slight decreases in residential loan demand.

The report said that credit standards remained largely unchanged. Bankers in Atlanta summed it up by saying they remain "cautious about residential lending and fiercely competitive over commercial lending."

Several district banks reported "heated competition" for customers with high quality credit.

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